1. Germany’s stock exchange suggests tougher rules after Wirecard scandal — Monday

Germany’s blue-chip index should expand to 40 from 30 companies with tougher membership criteria, exchange operator Deutsche Boerse said on Monday while outlining proposed reforms in the wake of the Wirecard accounting scandal. Investors have until 4th November to submit their comments on the stricter new admission criteria, which include banning companies from the DAX if they don’t submit their accounts on time. Members of all the German indices, which include the DAX, MDAX, TecDAX and SDAX, would also need to show proof of an audit committee on their supervisory board in future. The new proposals also say that companies should be demonstrably profitable before they can move up into the leading DAX index, as well as reducing the number of constituents in the mid-cap index to 50 from 60.

The German financial world has been shaken by the huge scandal at payments company Wirecard, after it emerged in June this year that billions were missing from its balance sheet. Wirecard declared bankruptcy in June, and was ejected from the DAX in August. Insolvency administrators are currently selling off the company’s assets to try and recoup some of the billions owed to its creditors.

2. UK businesses borrow more in three months than in 2019 — Tuesday

British businesses borrowed 50% more in the second quarter of 2020 than in the whole of the previous year as the coronavirus crisis hammered the economy, new figures show from the banking industry show. Businesses borrowed a total of £34.5 billion in the three months to the end of June, according to a report by banking lobby group UK Finance, 50% more than the total for the entirety of 2019. Stephen Pegge, managing director of commercial finance at UK Finance, said the increase in borrowing reflected “this significant demand with new overdraft facilities as well as the Government’s business interruption finance schemes providing support”.

July’s UK Finance report, which was prepared by EY, called for the government to help manage the debt burden through a new state-backed entity that would help refinance the debt. The Treasury has so far resisted these calls, instead extending the repayment window for COVID support loans. Fears have been raised over the scale of potential government losses through the COVID-19 lending facilities, especially the Bounce Back Loan scheme (BBL), designed to keep small businesses afloat during the pandemic. The government guarantees 100% of each BBL. The government’s internal estimates fear that losses on Bounce Back loans, the government’s biggest coronavirus support scheme , could be as high as 60%. That would equate to around £23bn of losses at today’s level of lending.

3. US yield curve steepens — Tuesday

The US yield curve has steepened sharply as investors weigh the prospects of a Democratic victory in the upcoming US election. On Tuesday, the yield on five-year Treasury notes was at one point 1.27 percentage points below that of 30-year government bonds — the widest gap since 2016.

According to the Financial Times, at the high of the day, the yield on 30-year Treasuries had risen 0.14 percentage points since the start of the month to 1.6%, while the benchmark 10-year yield was up 0.1 percentage points to 0.78%. They fell to 1.5% and 0.74% after the stimulus talks news. Investors said the back-up in longer-dated Treasury yields in recent days was driven in part by the growing chance that the November election could result in a “blue wave” whereby the Democrats clinch the presidency and both chambers of Congress. A Democratic sweep could pave the way for more ambitious relief packages to support the US economic recovery — and more Treasury securities flooding the market to fund such efforts.

4. US stocks gain after Trump suggests further stimulus for the economy — Wednesday

US stocks gained ground on Wednesday after President Donald Trump suggested a new stimulus bill. The S&P 500 index closed 1.7% higher and the tech-focused Nasdaq Composite gained 1.9% after Trump tweeted he was “ready to sign” a “Stand Alone Bill for Stimulus Checks ($1,200)”.

The White House on Friday also took a new coronavirus stimulus offer to Democrats, believed to cost $1.8 trillion, as the sides work to strike a deal before the 2020 election. The plan would mark an increase from the $1.6 trillion the Trump administration previously proposed. Congress still faces several hurdles to crafting pandemic relief legislation and passing it. Even if the White House and Democrats can reach an accord on how much money to inject into a reeling health-care system and economy, they have to craft a bill that can get through the Republican-held Senate.

5. £1.1 billion takeover bid made my hedge fund for TalkTalk — Thursday

Telecoms group TalkTalk has received a £1.1bn ($1.4bn) takeover approach from a London hedge fund, which hopes to take the business private. The firm said in a statement on Thursday that it had received a preliminary offer from Toscafund Asset Management to buy the business for 97p per share. The bid comes amid continued dissatisfaction among customers with the level of service they receive from TalkTalk. In recent years, the firm has frequently been assigned low rankings in surveys by regulator Ofcom.

After the announcement TalkTalk shares hit a four-month high following the announcement, rising 16% to exactly 97p. However, they are still below their pre-Covid levels of around 120p in February. Toscafund is headed up by Martin Hughes and Executive chairman of TalkTalk Sir Charles Dunstone needs to approve the takeover for it to go ahead, after Hughes insisted on his backing. Dunstone, the Carphone Warehouse founder who launched TalkTalk in 2013, still holds a nearly 30% stake in TalkTalk, making him the firm’s biggest shareholder. Toscafund is the second-largest shareholder with a 29% stake. TalkTalk said in a statement: “The board has considered the terms of the proposal and has agreed to progress the proposal further with Toscafund along with taking advice from the company’s advisers”.

6. Airline stocks lead FTSE gains this week — Thursday

Airline stocks are gaining on the FTSE 100, with IAG and Rolls-Royce among the firms making some of the largest gains this week. IAG shares were up as much as 11% on Thursday and Rolls-Royce had even more dramatic gains, up 22% in London. Chris Beauchamp, chief market analyst at IG said, “It’s partly just a short-term rebound as they’ve been so beaten down, but I think hints about a rescue package for US airlines have lifted the sector here, and also Rolls has been given a boost thanks to talk about British-made small nuclear reactors.”

The UK government could spend up to £2bn ($2.63bn) on a project to design and build mini-nuclear power stations as the industry suffers from major setbacks that could leave a hole in the national electricity supply. The project to build 16 sites by 2050 could help Rolls-Royce, which is leading the nine-member consortium to design the “rapid assembly” power stations.

7. UK economic growth slows in August — Friday

UK economic growth grew by a less than expected 2.1%, despite boosts from the ‘Eat Out To Help Out’ scheme. The expansion fell short of the 4.6% consensus forecast of economists polled by Reuters and output in August remained 9.2% below its pre-pandemic levels in February. Although this is the fourth consecutive month of expansion following the slump induced by the coronavirus lockdown.

However, growth in August was slower than the expansion seen in both June and July. In June, the economy grew by 8.7% and in July, by 6.6%. Analysts said the coming months were likely to see growth slackening further because of new Covid restrictions, the end of the furlough scheme in October and concern over a no-deal Brexit.

The ONS also issued figures for the three months to August, showing growth of 8% over the period compared with the previous three months as lockdown measures eased further. “The economy continued to recover in August but by less than in recent months,” said Jonathan Athow, the ONS deputy national statistician for economic statistics. “There was strong growth in restaurants and accommodation due to the easing of lockdown rules, the ‘Eat Out to Help Out’ scheme and people choosing summer ‘staycations’. However, many other parts of the service sector recorded muted growth.

Where did stock markets finish this week?

The FTSE 100 closed at 6,016.65, gaining 1.94% this week.
The FTSE 250 closed at 18,074.42, gaining 3.9% this week.
The Nasdaq closed at 11,579.94, gaining 4.56% this week.
The S&P 500 finished at 3,477.13, gaining 3.84%.
Japan’s Nikkei 225 finished at 23,619.69, gaining 2.5% this week.
The Shanghai Composite finished at 3,272.08, gaining 1.68% this week.

Top financial market stories of the week