Fears of second wave cast cloud over markets - James Rowbury

Global markets have offered us a mix of returns this week, as a surge in Coronavirus cases compounded fears of a second wave emerging in Europe
James RowburyJames Rowbury
James Rowbury

.Although the FTSE 100 lagged slightly, US markets made consistent gains, with investors’ hopes rising as new progress is made in the development of tests and vaccines for COVID-19.

House prices reversed the losses recorded in May and June, as they rose by 2% last month, taking the average price to £224,123.

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Nationwide alluded that the recovery in the housing market had been “unexpectedly rapid”, as the rise in August was the highest since February 2004.

As a result, annual house price growth has now accelerated to 3.7%, from 1.5% in July, driven primarily by the Chancellor’s announcement on the temporary suspension of stamp duty, but also because of pent-up demand carried over from economic lockdowns.

“Behavioural shifts” have also caused further activity, as people reassess their housing needs after lockdown; a garden and space to roam sounds all-the-more appealing after being stuck

inside for a quarter of the year.

Nevertheless, as lenders tighten their criteria for offering loans, many may struggle to secure a mortgage. Anyone who cannot offer a large deposit or whose job is at risk because of the virus is likely to find it harder to get a loan than before the pandemic, putting a potential ceiling on the boom.

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Despite this recovery in the housing market, the FTSE 100 lost 2.57% this week.

On Tuesday, Oxford Biomedica signed an 18-month supply agreement under a three-year supply and development deal with AstraZeneca, for the Coronavirus vaccine candidate AZD1222.

The news of the deal followed AstraZeneca’s announcement of expanded US trials of the vaccine. AstraZeneca is currently developing the vaccine alongside the University of Oxford. The deal involves the large-scale commercial manufacture of AZD1222, and Oxford Biomedica has already stated that the supply period may be extended into 2022 and 2023.

AstraZeneca will pay Oxford Biomedica £15 million up front as a capacity reservation fee. As the vaccine programme continues and the manufacturing capacity increases, the company is

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to receive additional revenue of £35 million plus costs for manufacturing multiple large-scale batches of AZD1222. Oxford Biomedica’s share price has gained 5.34% since the announcement.

As President Donald Trump’s administration urged US states to get ready to distribute a potential COVID-19 vaccine by the beginning of November, the S&P 500 gained 2%, once again climbing to record highs.

China’s manufacturing industry made a recovery in August, driven by the sharpest increases in output and new orders since the start of 2011. The headline seasonally-adjusted Purchasing Managers’ Index rose to 53.1 in August, from 52.8 in July, according to Caixin.

Total new work expanded at the fastest rate amid reports of stronger client demand, as the global and domestic economy continued to recover from the Coronavirus pandemic.

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Manufacturers reported the first increase in new export sales since December 2019, with signs of employment stabilising, as job cuts in the manufacturing sector continue to fall.

Despite experiencing better-than-expected performance in the first half of the year, Yorkshire-based Provident Financial reported a loss before tax of £28m for the six months ending June 2020, compared to a profit of £43.1m during the same period last year.

The group’s Vanquis Bank and Moneybarn businesses both saw a profit; however, its Consumer Credit Division reported a loss before tax of £37.6m. Overall, the firm was pleased with its performance despite challenges from COVID-19.

Looking forward, the company’s strong financial position will allow it to continue to lend and help its customers through potentially challenging times in the coming months. Over the last month, Provident Financial’s share price has gained 22.8%.

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Please note that investments and income arising from them can fall as well as rise in value. Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.

By James Rowbury, Investment Research Coordinator, Redmayne Bentley

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