In summary, it’s been a relatively quiet week for news affecting financial markets, with little of note around either the US election or Brexit negotiations. Following last week’s announcement that Apple is the US’s first $2tn dollar company, a share split was issued on Monday following which the price rose by a further 3.4%. Swapping 1 share for 4 doesn’t change the value of the company but it does lower the point of entry to encourage smaller retail investors. This is reported to have fuelled the price rise. While we are all familiar with iPads and iPhones, it’s Apple’s service businesses that are exciting investors. These include its App Store and Apple Pay which already has over half a billion paying subscribers. Ironically Tesla, the electric car manufacturer led by Elon Musk, split its stock on the same day and its share price fell by almost 5%.
In July I observed that “last year Toyota was the world’s largest car manufacturer, making 10m cars and a profit. Tesla made just 300,000 cars and no profit but last week overtook the automotive giant becoming the most valuable car manufacturer in the world. Perhaps a good example of irrational market exuberance but equally that things are changing.” It seems that on balance markets favour new technology and also that perhaps our changing behaviours means demand for the car as we know it is also changing.
The demand for manufactured goods has picked up both in the UK and abroad albeit there are still job cuts being made. The PMI (purchasing managers’ index) measures the materials being bought by manufacturers and has been in positive territory for 3 months (after a historic low in April and further weakness in May). This has contributed to a positive outlook and arguably a strong rebound in the UK’s GDP for the third quarter. While this is welcome news, the extent to which GDP fell in the UK compared to other developed countries means the rebound may be more of a relief than a cause for celebration.
Earlier in the pandemic the UK had one of the highest rates of infection but figures quoted by the BBC this week show that the UK is now doing rather well compared to other European countries. Deaths and hospital admissions are also much lower although we are continually reminded that that the situation can change quickly with an autumnal or winter surge.
Virus spikes continue to be managed by local restrictions in the UK and the list of countries which require those returning to quarantine appears ever changing. This seems to be the way of things as we learn to live with the virus until a vaccine is widely available. In many respects there’s nothing new or unexpected here. People are vigilant when they are out and about, but they are out and about, so as predicted virus transmission increases.
Whether you are out and about or at home, I hope you have a good weekend.
Regards
Kenny