Markets Slip On China Sanctions

Markets are red across the board this morning as virus case numbers creep up once again and the US prepares sanctions on Chinese officials involved in disqualifying opposition lawmakers in Hong Kong. This seems like a parting blow to China from the Trump administration. The FTSE is the only major index bucking the trend, gaining 0.3% as Sterling (FXB) sinks 1.5% against the dollar and investors become nervy as the Brexit deadline looms (more below).

On Friday, non farm payrolls data showed that the US economy added 245,000 jobs in November versus the 400,000+ that economists had been anticipating. The unemployment rate edged down from 6.9% to 6.7%, although according to The WSJ that is in part because some of those who have lost jobs have stopped looking for work entirely - taking them out of the US labour force. The jobs report provides more evidence that the US economic recovery has slowed as COVID-19 cases have once again surged to record levels. Stock markets actually reacted positively on Friday, with investors acting on the basis that worrying employment figures could prompt lawmakers into agreeing a new round of fiscal stimulus sooner rather than later. In a Friday note, analysts at investment firm Edward Jones noted that since 1945 the unemployment rate has improved below 7% on seven occasions; one year later, on average the unemployment rate was 5.8%.

Nasdaq Composite closes in on +40% mark in 2020

All three major US stock indices delivered gains last week, with the Nasdaq Composite’s 2.1% rally, taking it to within spitting distance of a 40% year-to-date gain. Since 1972, the index has passed the 40% mark in a calendar year four times. By comparison, the S&P 500 is up 14.5% year-to-date, and the Dow Jones Industrial Average is up 5.9%. That reflects the dominance of tech names in the Nasdaq index and the dramatic outperformance of tech stocks in 2020. Last week the S&P 500’s information technology sector posted another solid week, with a 2.8% gain, although the downtrodden energy sector was the week’s big winner at +4.5%.

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