Market Review August

UK

The FTSE All-Share Index rose 2.4% in sterling terms during August. The UK economy contracted 20.4% in the second quarter, the worst result of any major European economy, underscoring the impact of the UK’s protracted Covid-19 lockdown. However, monthly survey data for August showed some improvement, with business activity gauges suggesting the economy was on course to register positive growth in the third quarter. Retail sales jumped 3.6% in July from the prior month, indicating some resurgence in consumer spending. Survey data nevertheless pointed to rising job losses in the retail industry. UK inflation increased to 1% in July from 0.6% in June. In terms of sectors, oil equipment, services & distribution (21.6%) and travel & leisure (16.7%) outperformed, while beverages (-8.0%) and gas, water & multiutilities (-6.2%) lagged.

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

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Europe

The FTSE World Europe ex-UK Index returned 2.2% in sterling terms in August. European economic data was generally consistent with the continuing recovery post-lockdown, following the substantial contraction of the second quarter. Survey data on business activity for August pointed to expansion in the eurozone manufacturing and services sectors, albeit at a slower pace than in July. Eurozone retail sales rose 5.7% in June versus the prior month, bouncing back to pre-crisis levels. German industrial production surged 8.9% in June. However, Europe experienced a rise in new daily Covid-19 infections over August, especially in France and Spain, raising concerns that this could derail recovery. Data showed the EU economy had shed 5.5 million jobs in the second quarter, while European Central Bank officials warned more jobs could be lost in the autumn.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index returned 5.4% in sterling terms over August. US equities performed strongly over the month, buoyed by improving economic data as well as Covid-19 vaccine and treatment hopes. While remaining elevated, the numbers of new daily Covid-19 infections recorded in the US also fell over August. US survey data on manufacturing and services indicated an acceleration in activity in August versus the prior month. The Federal Reserve unveiled a new strategy to allow inflation to periodically breach its 2% target to make up for periods of below-target inflation. Meanwhile, President Trump issued executive orders to ban the social media apps TikTok and WeChat from operating in the US if they are not sold by their Chinese parent companies within 45 days.

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

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*Source: Lipper to 31 August 2020, total return. Indices rebased to zero at 31 July 2020.

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