FTSE Rebounds But Covid, Brexit Concerns Could Limit Gains

FTSE looks northwards but Brexit & covid cases likely to limit gains

Charts (6)

The FTSE is finding its feet after experiencing sharp losses in the previous session and despite a weak handover from Wall Street. However, any gains are expected to be capped as sentiment remains fragile amid surging covid cases and tighter lockdown restrictions.

The economic recovery from the initial covid hit was already starting to stall. A further tightening of restrictions, investors fear, will derail a very fragile recovery. The hospitality sector, which is already on its knees will struggle to survive another lockdown blow and airlines are facing a very long difficult winter. 

Rio Tinto warns
Rio Tinto warned that global steel production outside of China has fallen sharply owing to the covid crisis, despite government propping up economies. Rio confirmed that worldwide trade has been showing signs of recovery in Q3 however the recovery rate is slowing as pent up demand dissipates. A resurgence of covid is adding to the uncertain outlook and greater potential for further economic fallout. 

A slither of good news
After a week of disappointing news on the vaccine front, with Johnson & Johnson and Eli Lily pausing their testing programmes, good news from Oxford university that a rapid Covid -19 test has been developed, with high accuracy is offering some support to coronavirus battered stocks. The test can identify covid in less that 5 minutes and could be used in mass testing at airports and in businesses. With the prospect of a vaccine being pushed further into next year and beyond this could be a viable alternative to taking a step towards normalcy.

Brexit in focus
Brexit is the other central focus for UK markets as we pass Boris Johnson’s 15th October Brexit deadline. The Pound is relatively well supported, trading mildly lower as it is widely expected that the two sides will extend talks. Michel Barnier has indicated that he is prepared for talks to run until the last day.  Boris Johnson is due to set out his approach to Brexit talks after the EU Summit. The EU has put the onus on the UK to make concessions to take talks forward. Despite ongoing differences between the two sides, the baseline expectation for the Pound at these levels is that some form of bare bones deal will be achieved. 
 


More from FTSE 100

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.