FTSE Rebounds But Covid, Brexit Concerns Could Limit Gains
Fiona Cincotta October 16, 2020 8:38 AM
FTSE looks northwards but Brexit & covid cases likely to limit gains
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.
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.
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.
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