Market Overview – 23/09/2020

Global equity markets were mostly flat to down last week as Covid-19 cases rose in Europe and the US central bank, the Federal Reserve, painted a fairly downbeat picture of the economic outlook. The UK has joined France and Spain as countries now experiencing a second wave of coronavirus infections. There has been much speculation that there will be further restrictions on social interactions introduced in England, including the possibility of a two week lockdown to coincide with school half term next month. A Government announcement on possible further measures is expected on Tuesday.

The US Federal Reserve indicated last week that interest rates were likely to remain close to zero until 2023 in order to meet the new target of full employment and an “average” inflation rate of 2%. Ordinarily a signal of lower rates for longer would boost share prices, but on this occasion the market took a more circumspect interpretation – that economic growth was likely to be subdued for longer. With no new stimulus measures announced to reflect the Fed’s latest assessment, shares went into retreat.

Pockets of exuberance remain however. Last week saw the US stock market debut of cloud data company Snowflake. Priced at $120 per share, the company doubled in value on the first day of trading, leaving it with a market capitalisation at $70 billion. This is a loss making company that is expected to generate revenues of around $500 million this year. Shades of 2000 anyone?