Market Review September

UK

The FTSE All-Share Index fell 1.7% in sterling terms during September. The UK economy grew 6.6% in July, its third consecutive month of expansion, though output remained well below pre-Covid-19 lockdown levels. The Bank of England warned it could take the economy longer to recover than previously forecast. Faced with rising Covid-19 infections, the UK authorities brought in fresh restrictions, while advising people to once again work from home where possible. Although the UK agreed a free trade deal with Japan, it was at loggerheads with the EU on post Brexit trade terms, with the UK government proposing legislation to override elements of the EU withdrawal agreement. In terms of sectors, forestry & paper (12.2%) and leisure goods (10.9%) outperformed, while oil & gas producers (-13.1%) and oil equipment, services & distribution (-17.8%) lagged.

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

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Europe

The FTSE World Europe ex-UK Index returned 0.7% in sterling terms. The eurozone registered deflation for the first time in four years, with a reading of -0.2% in August versus inflation of 0.4% in July. There was concern of further downward price pressure to come given the impact of factors such as low energy prices and euro strength. German industrial production for July disappointed forecasts, while eurozone retail sales also declined in the same month, raising fears that the post-lockdown, nascent recovery was losing traction. Monthly eurozone purchasing managers’ survey data for September were mixed, with a fall in services activity contrasting with a rise in manufacturing. In line with the trend of the previous month, Covid-19 cases continued to increase over September, with new daily infections reaching fresh highs across certain European countries.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index returned -0.5% in sterling terms over September. There was weakness among US technology stocks, with the sector giving up some of its strong year-to-date gains. The US economy continued to add jobs over August, though at a slower pace than in July, with US unemployment at 8.4% in August compared to 14.7% at the peak in April. The Federal Reserve (Fed) forecast interest rates to remain at near-zero levels until at least the end of 2023. Fed chair Jay Powell warned the nascent US economic recovery could be endangered without agreement from US lawmakers on a new stimulus package. Trade tensions between the US and China remained elevated, with the Trump administration bringing in restrictions on exports to China-based chipmaker Semiconductor Manufacturing International Corporation on national security grounds.

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

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*Source: Lipper to 30 September 2020, total return. Indices rebased to zero at 31 August 2020.

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