Morning Report

Morning Report – Friday 28th August

Main Headlines

U.S. technology giants are increasingly dominating the stock market in the midst of the coronavirus pandemic and some investors fear the pump is primed for a tech fuelled sell off. The combined value of the S&P 500’s five biggest companies – Apple, Amazon, Microsoft, Facebook and Alphabet Inc- now stands at more than $7 trillion, accounting for almost 25% of the index’s market capitalisation. That compares with less than 20% pre-pandemic.

Japanese stocks tumbled and the yen rose after a report that Prime Minister Shinzo Abe will resign due to health reasons. Treasury yields jumped after Jerome Powell said the Federal Reserve will remain accommodative and shift to a more relaxed approach on inflation. Japan’s benchmark Topix Index fell as much as 1.6% before paring losses, after broadcaster NHK said Abe would explain his reasons for a resignation at a news conference on Friday. U.S. and European stock futures rose along with most Asian equities, outside Japan. The S&P 500 reached a fresh all-time high yesterday. The Nasdaq Composite also set a record before closing in the red.


Sterling touched an eight month high against the dollar yesterday. Bank of England governor Andrew Bailey is due to speak remotely at the Jackson Hole event on today. In recent weeks, sterling has been buoyed by a broadly weakening dollar, as risk sentiment recovered and investors piled back into currencies perceived as riskier bets. The pound remains up more than 6% since the start of July.


Brexit negotiations suffered another setback overnight after German Chancellor Angela Merkel, who holds the rotating presidency of the EU council, removed the subject from the agenda of a meeting of EU ambassadors next week due to a lack of progress in negotiations. It had been expected that German Chancellor Merkel could play a crucial role in breaking any deadlock however, this appears not the be the case currently.


The dollar is on the defensive after the Federal Reserve’s announced its aggressive new strategy to lift employment and an increased tolerance for higher inflation. Speaking at the Fed’s Jackson Hole symposium, which was held virtually this year, Chair Jerome Powell said the central bank will seek to achieve 2% inflation on average, so that periods of super-low inflation would likely be followed by an effort to lift inflation “moderately above 2% for some time,” and to ensure economic recovery and job creation.

Main Economic Data/Central Banks/Government (All Times BST)

7:00 a.m.: UK Nationwide House Prices
7:00 a.m.: German GFK Consumer Sentiment
8:00 a.m.: Spain Retail Sales
11:00 a.m:. Ireland Retail Sales
2:45 p.m.: US Chicago PMI
3:00 p.m.: US Consumer Sentiment