Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

Notes from the Trading Desk – Franklin Templeton

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what their professional traders and analysts are watching in the markets. The European desk is manned by eight professionals based in Edinburgh, Scotland, with an average of 15 years of experience whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The Digest

Last week was more interesting for global markets as each day started on a steady footing in Europe, before the United States woke up and unraveled things. This resulted in the STOXX Europe 600 Index closing down 1.9% on the week, but outperforming the S&P 500 Index, which finished down 2.3%. Towards the end of the week, US technology stocks finally faltered, whilst US price momentum had its worst day of the year last Thursday. Apple lost more than US$150 billion of market capitalisation in a single day, demonstrating the sheer scale of these names. Markets in the Asia Pacific (APAC) region were also down 1.6%, taking their lead from the United States.

US Tech Stocks Start to Falter but European Value Catches Interest

Alongside the move in US tech stocks, towards the end of the week we saw rotation into some of the more beaten-up European value names. Real-economy proxies benefitted on further vaccine/recovery hopes, heavy positioning and a drift higher in real yields. Pharmaceutical company AstraZeneca said last week that it had started phase I/II clinical trials in Japan for its AZD1222 coronavirus vaccine candidate.

The press also discussed the Centers for Disease Control and Prevention’s (CDC’s) notification to public health officials across the United States that they should be prepared for a vaccine to be ready by November 1, just days before the US presidential election. Outside of vaccine hopes, long-awaited stimulus plans also played into the value rotation, following signs of an unexpectedly steep V-shaped economic recovery in Germany and France.

European airlines generally got a lift last week, with the majority of gains made towards the end of the week. The Credit Suisse European Airlines Index gained 5.6% last Thursday and Friday, helped by an article in The Times highlighting increased pressure on the UK government to introduce coronavirus testing in airports, especially given recent headlines on the development of 15-minute tests from Swiss pharmaceutical giant Roche Holding AG and Abbott Laboratories Limited. More than 30 countries already have a system of airport testing for the coronavirus, including Germany, France, Austria, Dubai and Iceland. It is hoped that this would help with blanket quarantine lists. There is also some relief that Portugal and Greece have not yet been added to the UK-wide quarantine list (despite being added in Scotland).

With the continuous strength of US tech stocks and a number of headwinds in Europe, European equities underperformed the MSCI World Index by 15% since March and by 10% since June, marking the largest six-months of underperformance in more than 30 years. The question now for many is whether we will see this dynamic reverse, with a focus on a shift in the recent headwinds of poor PMI data, foreign exchange headwinds, and the impact of the pandemic. Many investors are also wondering whether the FAANG selloff last week was a blip, or the start of something bigger. More on this shortly.

UK Equities Remain Unloved

The exporter-heavy UK FTSE 100 Index had another rough week of trading and closed last week down 1.6% despite a stronger US dollar. Brexit remains the key focus and the tone was set at the start of the week with reports that UK negotiators would be recommending the country leaves with no deal, should the European Union (EU) fail to drop its demands around state aid for UK companies that would put EU rivals at a disadvantage. There was then a meeting between the EU’s negotiator Michel Barnier and the UK’s Chief Negotiator David Frost last week after which Barnier said his UK counterparts had not engaged constructively. This impact has had an adverse impact on the UK economy.

Some observers also pointed to the UK government’s “fumbled” response to the pandemic as a cause of the underperformance of UK equities. The United Kingdom imposed a lockdown later than most other European nations, so it remained in place longer. As a result, the UK economy suffered a more dramatic contraction in its gross domestic product (GDP).

Nonetheless, the most recent UK Purchasing Managers Index (PMI) data pointed to a recovery, with the Composite PMI figure for August at 59.1, a touch behind consensus but still ahead of July’s reading of 56.5. Consumer activity is improving too, with footfall back to three quarters of its value in the week commencing 24 August versus same time last year. Mobility in certain regions is increasing, with traffic and pedestrian counts around London reaching pre-pandemic levels last week. Whilst COVID-19 infections in the United Kingdom are on the rise, there has been no spike (at least not yet) like we have seen in countries such as Spain and France.

This week is poised to be a dramatic one for the EU and the United Kingdom, with a five-day stretch of face-to-face discussions in London referred to as a “moment of reckoning”. Officials on both sides are warning that a no-deal split at the end of the Brexit transition period is becoming more likely, with the UK’s Foreign Secretary Dominic Raab warning over the weekend that the United Kingdom is ready to adopt Australian-style rules if a deal cannot be made.

However, we think UK equities could be poised to rally should the country manage to control and suppress the COVID-19 virus and strike a Brexit deal by the end of the year.

We will be following the UK Treasury Select Committee hearing this Tuesday on the Bank of England’s (BoE) latest quarterly inflation report. Friday also looks set to be a busy day for economic data as we await the latest readings for GDP, industrial production and July’s foreign trade.

The Week in Review


European markets were lower across the board last week, with a steady start to most days disrupted once US markets woke up. The selloff in US technology names towards the end of the week weighed on risk sentiment, although the rotation we discussed saw beaten-up value names outperform. Equities in the United Kingdom underperformed, whilst the government’s long-awaited stimulus announcement helped French equities make more muted gains.

On the macro front, positive commentary on German data helped its market, as Germany’s Finance Minister Peter Altmaier said last week that the country’s GDP was showing an “unexpectedly fast V-shaped recovery” with its “can and will” attitude to avoid a second lockdown. This followed press reports that the German government is slightly less pessimistic on the economy this year, but anticipates a weaker rebound than initially expected in 2021.

On Thursday of last week, France finally unveiled its €100 billion stimulus plan. The package involves wage subsidies, tax cuts and funding for environmental projects (tying into our environmental, social and corporate governance [ESG] focus from last week) and will add 160,000 jobs next year. The plan was received well and aims to shift the focus from emergency spending to instead address the longer-term issues of job creation and weak investment.

After we saw a large amount of deals earlier in the year, things had gone quiet over the summer period. It was interesting to see a return of that theme last week, with US$5 billion of placings in just 48 hours, including Siemens Healthineers ($3.4 billion), Vonovia ($1.2 billion), and Ryanair ($400 million). The overall liquidity raise by European non-financial corporates has been equivalent to almost 5.5% of euro-area GDP since March. With the high cash levels likely to be too big and inefficient for companies to run with indefinitely, we may see bond tenders in the credit market soon, generally boding well for industrial and consumer spreads. There is also a chance that in the long term, this excess cash will lead to a return of European merger & acquisitions and buybacks.

United States

Last week started with US equities continuing their familiar grind higher, but the rally come to an abrupt halt, with some of the sharpest market declines seen since March. Looking at weekly sector performance, materials and utilities outperformed and were the only sectors in positive territory.

There has been much debate on what was the catalyst for the declines. Interestingly, there isn’t really one “smoking gun”. Many point to recent gains being fuelled by aggressive buying linked to options trading. If this buying demand is now satisfied, could that have been a factor? In addition, Tesla saw declines on news a leading shareholder had reduced its stake, so this could have added to nerves. Fears of a messy US presidential election result are also a potential factor. Ultimately, we have to look at these declines in the context of where US tech names have come from. We have discussed many times the recent meteoric rises for US tech, so when we do see declines, we are likely to see extreme moves as nervous investors look to take profit.

The macro data highlight was Friday’s monthly employment data. We saw August nonfarm payrolls grow by 1.37 million, surpassing expectations. The unemployment rate came in at 8.4%, also significantly better than expected.

Asia and Pacific (APAC)

Last week, Asian markets took their lead from the selloff in US markets, leaving the MSCI Asia Pacific lower on the week. It was quieter on the US/China trade dispute front, and in terms of Asia-specific news, there was much discussion of who will succeed Shinzō Abe as Japanese Prime Minister. Participants also focused on Chinese macro data. We had the Caixin China PMI Composite coming in 55.1 vs. 54.5 prior, while the Manufacturing PMI came in at 53.1 and the Services PMI came in at 54. Elsewhere, Chinese airlines performed well last week as Beijing opened the door to international flights.

The Week Ahead

The main event in Europe will be Thursday’s European Central Bank (ECB) meeting, with the ECB likely to keep its message on the dovish side and stay in “wait-and-see” mode. What will be interesting is any commentary on the euro.

ECB’s Member of the Executive Board Philip Lane essentially said the central bank wasn’t happy with the trajectory of the euro this week, so any commentary on its recent strength and the implications of this on policy will be in focus. We’d expect ECB President Christine Lagarde to repeat the argument that the euro is something the ECB takes into account but is not something the ECB targets specifically. We think any deviation from this type of rhetoric will likely impact markets.

UK Focus: UK/EU negotiators meet for a five-day stretch of talks. Many market participants will be  closely following the UK Treasury Select Committee hearing this Tuesday on the Bank of England’s latest quarterly inflation report. Friday will be heavy in terms of UK economic data, with readings for GDP, industrial production and foreign trade for July all due out.


Market holidays

7 September – US closed (Labour Day).
Otherwise, no major European markets closed this week.

Monday 7 September:

  • Data: Germany: (July) industrial production; Switzerland: (August) foreign currency reserves
  • Data: Germany: (July) trade balance; Italy: (July) retail sales

Wednesday 9 September:

  • Data: France: (July) Bank of France Industrial Sentiment

Thursday 10 September:    

  • Economic/Political: ECB interest-rate announcement and Christine Lagarde press conference
  • Data: UK: (August) RICS house prices; France: (July) industrial production; Italy: (July) industrial production

Friday 11 September:   

  • Economic/Political: ECB’s Philip Lane, Jens Weidmann and François Villeroy speak.
  • Data: UK: (July) industrial production, (July) Trade Balance


Franklin Templeton Key risks & Disclaimers:

What Are the Risks?

All investments involve risk, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Past performance is not an indicator or guarantee of future performance.

This article reflects the analysis and opinions of Franklin Templeton’s European Trading Desk as of 7th September 2020, and may vary from the analysis and opinions of other investment teams, platforms, portfolio managers or strategies at Franklin Templeton. Because market and economic conditions are often subject to rapid change, the analysis and opinions provided may change without notice. An assessment of a particular country, market, region, security, investment or strategy is not intended as an investment recommendation, nor does it constitute investment advice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy. This article does not provide a complete analysis of every material fact regarding any country, region, market, industry or security. Nothing in this document may be relied upon as investment advice or an investment recommendation. The companies named herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. Data from third-party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered by FT affiliates and/or their distributors as local laws and regulations permit. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction. 

Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.

MeDirect Disclaimers:

This information has been accurately reproduced, as received from Franklin Templeton Investment Management Limited (FTIML). No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment and may be deducted from the invested amount therefore lowering the size of your investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Investor Information Document (KIID), which may be obtained from MeDirect Bank (Malta) plc.

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

BlackRock - Why we keep leaning into risk
All News

BlackRock Commentary: Why we keep leaning into risk

Investment opportunities are emerging amid a unique macroeconomic backdrop, with U.S. equities leading gains, particularly driven by AI-related companies, and expectations of continued volatility. The focus is on overweight positions in U.S., UK, and Japan stocks, while favoring quality short-term fixed income and private credit investments.

Epic Investment Partners Weekly Article
All News

Epic Investment Partners Views: The Week Ahead

This week’s key events include China’s Third Plenum, the ECB rate decision, US bank earnings, and several significant economic data releases from the US, Eurozone, and UK.. Last week, Fed Chair Powell highlighted progress on inflation but emphasised caution in rate cuts, while China’s economic recovery showed signs of weakness with lower-than-expected inflation and GDP growth.

Experience better Banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. 

Sign up and open your account for free, within minutes.



We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.