Good morning,

It appears to be a good start for the week so far, despite some of the challenges we’ve got to face. The S&P500 hit a record high into the close on Friday and is now convincingly above the 3,500 level. This contrasts heavily with the FTSE100, which still needs a 25% boost to get back to where it was pre-pandemic.  The moves higher in the US come despite significant increases in Covid headlines and restrictions and people seem to be focussing much more on what could be once a vaccine lands, than what will be with likely more lockdowns in the US. To that end, we should hear more this week about the efficacy of the Moderna vaccine later this week which could in turn give markets another boost.

If markets dare to look at the longer term; Germany gave us some clear direction over the weekend, with their economy minister saying that the country should brace for 4-5 months of Severe Covid measures, and it’s likely they’ll be talking about further restrictions rather than an easing of existing measures. Germany is the West’s benchmark on how to manage a pandemic, so if that’s what they’re saying, we should perhaps start to think similarly in the UK too. Germany are keen to avoid the yo-yo effect on opening and closing and believe that a consistent set of measures it the best way to manage the risk to life. Admittedly Germany are in the fortunate position of being able to comfortably afford what they’re doing and in fact have said that they’re likely to have to borrow less money in 2020 than they had originally forecast.

It’s another key week for Brexit this week with a deal in theory needed by close of play on Friday if timelines are to be met. Environment secretary George Eustice said over the weekend though that is would be possible to get more time to do a deal – so that’s almost a certainty then. All the while the negotiators are trying to come to an agreement on the sticking points, the finer details of the parts that they do agree on are being filled in, so it’s quite feasible that both sides can ratify the measures on an ongoing basis and not have to wait until the 11th hour and then sign off the whole thing at once. Both sides have reiterated the intent to get a deal done, but also reinforced the difficulty in doing so.

The UK government is lurching from crisis to crisis and following Last week’s chaotic Cummings and Co. departures and infighting, the next thing on their list of PR problems is news that since the start of the pandemic £1.5bn worth of contracts has been awarded to Conservative party linked companies that previously weren’t prominent government suppliers. The Times and the Guardian both have pretty good breakdowns on the associations and the value of the work awarded – often that work falls just below the threshold at which a public tender would have to take place, or under emergency legislation where details of contracts awarded don’t have to be published within 30 days.
The news of “chumocracy” follows a speech by Lord Evans, former head of MI5 and chairman of the committee on standards in public life, in which he said that “the perception is taking root that too many in public life, including some in our political leadership, are choosing to disregard the norms of ethics and propriety that have explicitly governed public life for the last 25 years and that, when contraventions of ethical standards occur, nothing happens”.

It’s not much better across the Pond, where Trump is still refusing to concede and is doubling down on unsubstantiated tweets about the election being rigged. Additionally, he’s reported to be wanting to enact more sanctions on Chinese companies and officials for human rights violations and threatening US National Security. This is normally the point where the outgoing administration works in a coordinated effort with the incoming one, particularly on something as serious as this.

China may have got a major one-up on the US though, as over the weekend the world’s largest trade bloc was signed into existence. The 15 member nations of the Regional Comprehensive Economic Partnership took part in a virtual signing ceremony yesterday after almost a decade of work to get to this point. This is the first time China, Japan and South Korea have had a joint trade deal and this could bring up to $200bn in annual economic benefit by the start of the next decade. Away from economic gain is political influence, which is something the US will sorely miss in the region, particularly as it is no longer a part of the Trans Pacific Partnership, which Trump withdrew from in 2017.

Looking to the week ahead: As well as Brexit, we might actually see some moves on a US stimulus effort. Both Houses in the US are sitting this week, before going on holiday for Thanksgiving next week, so may use this week as the platform to get closer to a deal, knowing that change at the top is afoot and both parties using that within their narrative as to why its important to get a deal done. Investors are expecting this transitional period to yield very little, so any deal could be a huge upside mover.

Have a great week


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