Market Update Week to 18th September 2020

Global equity markets were subdued last week as US large tech stocks continued their difficult period with the Nasdaq suffering its third straight weekly loss for the first time this year.

Weekly performance up to 18 September 2020
FTSE 100 (UK) -0.4%
Dow 30 (US) 0.0%
Euro Stoxx 50 (Europe) -1.0%
Nikkei 225 (Japan) -0.2%

In terms of £ Sterling, it closed the week (to 18 September), at 1.29 US Dollars, which was 1.0% higher than the figure at the end of the previous week (11 September).

It was a similar story against the Euro.  £ Sterling closed on 18 September at 1.09 Euros, which was also 1.0% higher than the closing figure on 11 September.

Last week, we had updated inflation figures, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH).  It was 0.5% in August 2020 (this is August’s data which is reported in September).  This was down from 1.1% in the previous month largely due to lower prices in restaurants and cafes, arising from the Eat Out to Help Out Scheme.  The 12-month rate for the Consumer Prices Index (CPI) rate which excludes owner occupied housing costs and council tax was 0.2% in August, down from 1.0% in July.

There were no further changes to the Bank of England base rate last week following the two previous cuts in March.  The current rate remains at 0.1%.

The Omnis Managed funds, Openwork Graphene Model Portfolios and Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.

We believe this multi-asset approach aims to minimise global equity market falls in volatile periods.  Past performance is not a guide to future performance.  The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations.  You may not get back the amount you originally invested.


UK:  Government raises stakes in Brexit negotiations
US:  Tech shares retreat again
China:  Exports remain on upward trajectory
Europe:  ECB keeps rates on hold
Oil:  Prices drop over concerns about demand


OMNIS INVESTMENT UPDATE – Brexit and the outlook for UK investors

Brinksmanship certainly appears to be part of Boris Johnson and Dominic Cummings’ negotiating strategy. Just eight months after signing the terms of the UK’s withdrawal from the EU, this week saw the prime minister risk breaching international law to renege on that agreement. Though the true motive for this latest twist in the Brexit saga is debatable, one line of thought is that the UK government is aiming to increase the stakes to force some last minute concessions from the EU.

Indeed, a similar strategy was deployed in October, resulting in some small compromises from the EU and enabling Johnson to claim a victory and sign the withdrawal treaty. This week’s events could be part of an attempt to repeat the trick. If so, success would likely be a continuation of trade arrangements that look broadly similar to current arrrangements.

However, the UK government’s overhaul of an agreement it signed only eight months ago has not been well-received in Europe. It is possible that it could cause negotiations – which were already strained – to break down completely. This would point to a “hard” Brexit, with existing trading arrangements between the UK and Europe effectively abandoned. As trade with Europe accounts for c.12% of the UK’s annual economic output, this would undoubtedly be a significant shock to the system.

While there can be little certainty over how the negotiations will end, it appears to us that recent events have increased the chances of a hard Brexit. Indeed, this view seems to have shaped moves in currency markets. The sterling-euro exchange rate has been a reliable barometer of expectations throughout this saga and, at the end of last week, the pound bought as few euros as it has done at any time since the 2016 referendum.

If a hard Brexit is looking more likely, what does that mean for UK investors? When assessing the outlook, we have to consider a number of interlinked issues:


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