Weekly Market Insight

Latest Economic & Market Update 26th November 2020

26th November 2020

Good afternoon, it is November 26th 2020 and here is your economic and market update from BlackBee. 

Today’s focus:

  • ECB should clear environmental and Covid-19 related sovereign debts – Italian PM’s aide
  • UK facing its largest annual drop in GDP for more than 300 years

The ECB should be “cancelling sovereign bonds bought during the pandemic or perpetually extending their maturity” according to Riccardo Fracco, top aide to Italian Prime Minister Giusseppe Conte. He also called for a “green rule” which would exempt public spending on environmental investments in deficit calculations. Italian national debt levels have risen in the last 10 years. According to the IMF’s October Fiscal Outlook Italy’s Gross Debt as a % of GDP in 2020 is 158.3%, up from 119.7% in 2011. In 2025, the IMF forecasts Italian debt levels to rise to 152.6%. Ireland’s debt levels have contracted in the last 10 years. In 2011 following the global financial crisis, Ireland’s general government gross debt / GDP was 111.1%. In 2020 it is 63.7% and the IMF estimates that this will contract to 49.2% in 2025. When ECB President Christine Lagarde was asked in  European Parliament last week about the possibility of wiping out the pandemic induced debts, she replied that “I don’t even ask myself the question – it’s as simple as that – because anything along those lines would simply be a violation” of the law. Italian finance minister Roberto Gualtieri has also rejected Mr. Fracco’s suggestion. (Sources: Bloomberg, IMF)

The UK’s Office for Budget Responsibility (OBR) forecast than 2020 GDP will drop by 11.3%, the largest contraction in over 300 years. Unemployment is expected to peak at 7.5% in Q2 2021. A key assumption of the independent fiscal watchdog on future economic performance is that a Brexit deal will be agreed by the end of the year. Should the EU and UK negotiators fail to agree terms, a No Deal Brexit will lead to an 8.3% UK unemployment rate and a 2% negative impact on GDP. UK Chancellor Rishi Sunak told the house of commons that jobs in trade-intensive sectors including manufacturing, mining and quarrying are most exposed to “the loss of unfettered access to the EU market”. Ireland’s GDP, according to the European Commission, will contract this year by 2.3%. Monthly unemployment in Ireland was 7.3% in October. However, on a Covid-19 temporary payment adjusted basis, Ireland’s unemployment rate for October was 20.2%. (Source: OBR, Irish Times, European Commission, CSO)

Best & Worst Performers of Large Cap US Stocks on Wednesday
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Global Market Update
(as at close of markets 25/11/2020)