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

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.