Multi-Asset

Market Reviews - GBP (November 2020)

A roundup of factors affecting regional equity and bond markets over the month
December 2020
Subscribe to our Insights

Risk Disclaimer

Past performance is not a guide to future performance. The value of investments and income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any products that may be mentioned.

UK

The FTSE All-Share Index gained 12.7% in sterling terms during November, boosted by positive results from Covid-19 vaccine trials. England’s latest national lockdown was to expire on 2 December, being replaced by a new tiered system of restrictions. The UK government extended its furlough scheme until March against rising redundancies. The Purchasing Managers’ Index (PMI) of service sector activity pointed to contraction in November, reflecting the impact of England’s latest lockdown. However, the manufacturing PMI gauge suggested some upturn in activity against stockpiling associated with the soon-to-expire Brexit transition period. Trade talks with the EU reached a critical juncture with fisheries and state aid still unresolved. In terms of sectors, oil equipment, services & distribution (37.2%) and aerospace & defence (31.6%) led, while technology hardware & equipment (-11.2%) and leisure goods (-4.4%) lagged.

Risk Disclaimer

The value of investments and any income from them can go down as well as up and investors may not get back the original amount invested.

 

FTSE All-Share Total Return (TR) GBP (%)*

FTSE All-Share Total Return (TR) GBP (%)*

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any products that may be mentioned.

Europe

The FTSE World Europe ex-UK Index returned 13.7% in sterling terms as global equities surged on the back of positive results from Covid-19 vaccine trials. The eurozone’s composite Purchasing Manager’s Index for November fell into contraction territory as rising Covid-19 cases and fresh lockdowns weighed, though with manufacturing holding up markedly better than the service sector. Germany’s Ifo Institute said the country’s economy would likely contract in the fourth quarter owing to the pandemic’s second wave and associated restrictions. There were rising expectations that the European Central Bank would imminently unveil fresh stimulus as its chief economist warned of the increased risk of a double-dip recession in certain eurozone countries. Meanwhile, early official estimates for November suggested that eurozone inflation was at -0.3% for a third consecutive month.

FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

FTSE World Europe ex UK TR GBP (%)*

 FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index returned 8.2% in sterling terms over November. US stocks rallied sharply following encouraging clinical trial results from Covid-19 vaccines and the US elections, though returns for UK-based investors were held back by a fall in the US dollar. Democrat Joe Biden’s triumph in the presidential race was generally viewed as being constructive for US foreign policy. At the same time, results suggesting the Republicans could retain Senate control reduced expectations for major change on tax and spending. Despite a rise in new daily Covid-19 cases during the month, the US composite Purchasing Manager’s Index for November ticked up sharply, with business sentiment bolstered by progress on Covid-19 vaccines and the US elections. US unemployment eased to 6.9% in October versus 7.9% in the prior month.
FTSE

FTSE All-World North America TR GBP (%)*

FTSE All-World North America TR GBP (%)*

Japan

The FTSE Japan Index returned 8.6% in sterling terms during November. Along with global stocks in general, Japanese equities were buoyed by positive clinical trial results for Covid-19 vaccines. Official data showed Japan’s economy grew ahead of forecasts over the third quarter, at 5%, supported by a rise in domestic consumer demand. While progress on the vaccine front bolstered investment sentiment, business expectations were hindered by rising domestic Covid-19 cases. Japan’s composite Purchasing Manager’s Index fell further into contraction territory in November. Meanwhile, Japan’s headline inflation rate slumped to -0.4% year on year for October versus 0% in September. During November, Japan signed up to the new Regional Comprehensive Economic Partnership (RCEP), to be the world’s largest trading bloc, with the 14 other signatories including the likes of China, Australia and South Korea.

FTSE Japan TR GBP (%)*

FTSE Japan TR GBP (%)*

Emerging Markets

The FTSE All-World Emerging Index returned 4.8% in sterling terms over November, underperforming the global average during a month that saw global equities rally on encouraging Covid-19 vaccine trial data. Some of the countries worst affected by the pandemic outperformed over the month amid growing optimism that Covid-19 could be beaten. Thailand (21.6%) and Turkey (19.0%) advanced sharply on improved risk sentiment. Russia (18.0%) benefited from rising oil prices while Chile (11.2%) was boosted by an uptick in copper prices. China (-0.3%) lagged over November, though remained one of the best performers year-to-date. Chinese economic data remained positive, with the Caixin China General Manufacturing Purchasing Manager’s Index suggesting an acceleration in activity for November. India (5.4%) lagged amid continuing worries on its economy and weakness for the rupee.

FTSE All-World Emerging TR GBP (%)*

FTSE All-World Emerging TR GBP (%)*

Asia Pacific ex Japan

The FTSE World Asia Pacific ex Japan Index returned 11.1% in sterling terms, joining in a global rally on the back of positive Covid-19 vaccine trial results. Against this backdrop, Thailand (21.6%), Singapore (14.8%) and Korea (14.5%) were among the best performing markets over November. Australia (12.2%) enjoyed strong performance from basic resources stocks. Notwithstanding the progress on the vaccine front, Malaysia (5.8%) trailed the regional average, hindered by the impact of rising Covid-19 cases. Chinese economic data remained generally positive, with the Caixin China General Manufacturing Purchasing Manager’s Index suggesting an acceleration in manufacturing activity in November. The month saw the creation of the Regional Comprehensive Economic Partnership (RCEP), to be the world’s largest trading bloc, with its 15 members including China, Japan, Malaysia, Singapore, Thailand, South Korea and Australia.

FTSE World Asia Pacific ex Japan TR GBP (%)*

FTSE World Asia Pacific ex Japan TR GBP (%)*

Government Bonds

Global government bond yields ended the month little changed. Although positive results from Covid-19 vaccine trials boosted risk appetite, elevated Covid-19 cases and ongoing restrictions fed expectations that global economic growth would take some time to recover to its pre-coronavirus level. Meanwhile, signs that the Republicans could continue to control the Senate provided support for US Treasuries as the chance of a significant, Democrat driven surge in infrastructure spending appeared to diminish. The European Central Bank appeared on course to unveil fresh stimulus as its chief economist warned of the increased risk of a doubledip recession in certain eurozone countries. US headline inflation dipped to 1.2% in October versus 1.4% in September. Early official estimates for November suggested that eurozone inflation was at -0.3% for a third consecutive month.

Corporate Bonds

Global corporate bonds generated positive returns over November, with spreads tightening on encouraging results from Covid-19 vaccine trials and the outcome of US elections. Democrat Joe Biden’s triumph in the presidential race was generally viewed as being constructive for US foreign policy. At the same time, results suggesting the Republicans could retain Senate control reduced expectations for major change on tax and spending. The US composite Purchasing Manager’s Index for November ticked up sharply, with business sentiment supported by progress on Covid-19 vaccines. In contrast, the eurozone’s composite Purchasing Manager’s Index for November fell into contraction territory as rising Covid-19 cases and fresh lockdowns weighed. US telecoms group Verizon Communications sold $12bn of bonds to fund 5G network expansion and repay existing debt.

 

*Source: Lipper to 30-Sep-20, total return. Indices rebased to zero at 30-Oct-20.

Subscribe to our Insights
Related articles
No posts matching your criteria
VIEW MORE