Share prices fell heavily around the world during October as Covid-19 infection rates continued to rise. Governments intensified their lockdown measures, triggering concerns over prospects for economic recovery.
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- Investors were tense ahead of the US election
- The UK and EU failed to progress their Brexit negotiations
- The eurozone’s economy rebounded in Q3
Share prices fell heavily around the world during October as Covid-19 infection rates continued to rise. Governments intensified their lockdown measures, triggering concerns over prospects for economic recovery.
“In the UK, rising infection rates led the Government to instigate fresh lockdown measures”
Investors were tense ahead of the US Presidential election; although polls suggested that Democrat candidate Joe Biden would win, there was still significant uncertainty over the result. Meanwhile, new cases of Covid-19 continued to increase in the US during October and reported deaths had reached 229,686 by the end of the month. Concerns were compounded by a continued deadlock between Republicans and Democrats over funding for Covid-19 relief. The VIX Index rose to its highest level since June. Share prices fell sharply, and the Dow Jones Industrial Average Index dropped by 4.6% over the month.
In the UK, rising infection rates led the Government to instigate fresh lockdown measures from 5 November to 2 December. Although schools, universities, factories, and construction sites will remain open, all pubs, restaurants, leisure facilities, and “non-essential” shops will have to close. The decision triggered widespread concerns over the impact on companies in affected sectors in the run-up to Christmas. The news of the shutdown spurred speculation that the Bank of England will introduce further economic stimulus measures to try and avert a double-dip recession. The furlough scheme was extended to cover the period, but employers will have to pay national insurance contributions and employee pension contributions. Mortgage holidays were also extended. The FTSE 100 Index fell by 4.9% during October.
Brexit negotiations continued but the UK and EU ended the month without reaching a deal. Having contracted by 11.8% in the second quarter, the eurozone’s economy expanded by 12.7% during the third quarter. The region’s recovery has been thrown into doubt by fresh lockdown restrictions as the governments struggle to contain the spread of infection. Several European countries – including France, Germany, and Belgium – tightened restrictions on living and working, and the European Central Bank indicated that it is prepared to increase stimulus measures if necessary. Over October, the Dax Index fell by 9.4%.
