In this week’s market update: shares rebound after the worst week in three months; the US election looms over Wall Street; while on this side of the pond, it’s all about Brexit.

We enter the final three months of a remarkable year in the markets, with investors counting a long list of things to worry about. The pandemic is obviously top of the agenda, but with the US election now just six weeks away and the final round of Brexit negotiations underway there is plenty to focus on away from Covid on both sides of the Atlantic.

The cocktail of concerns has hit markets in recent weeks, with the S&P500 notching up a fourth consecutive down week and the FTSE 100 dipping below 6,000 and staying there.

This week saw a bounce back, but it followed the worst single week for three months and one of the worst since the pandemic began at the start of the year. Financials are in focus after a sell-off last week that saw a European index of banks fall to its lowest level since the 1990s.

Other sectors in the spotlight have been those most obviously at risk from renewed restrictions on movement. Travel and leisure companies, in particular, look exposed, with persistent stories that airlines are living on the edge.

A wider divergence between Europe and America, where the virus is still at large, and Asia, where it looks to have been contained, is opening up. Chinese data this week showed that industrial company profits are bouncing back quickly.

Although the pandemic is still top of the agenda, investors may allow themselves to be distracted in the next three months when attention is bound to shift to the Presidential election and Brexit, two issues which have been on the back burner over the summer.

The heat was turned up in the US over the weekend, by allegations that President Trump has engaged in extensive tax avoidance in recent years to the extent that he has paid as little as $750 in Federal taxes in the past couple of years.

Another cloud hanging over this year’s campaign is the risk of an indecisive result, possibly contested by one or other candidate. President Trump has pointedly refused to say that he will concede if he is defeated on November 3.

This is playing out in the financial markets in the form of a spike in the costs of insuring against market volatility in the days around the election. Futures contracts tied to the Vix volatility index have spiked higher recently.

Even without the usual war of words that cranks up in the weeks ahead of the four-yearly Presidential vote, there are plenty of policy differences for investors to focus on in this election. The two candidates represent very different economic policies, with Joe Biden for the Democrats vowing to spend heavily on healthcare, education, infrastructure and clean energy. The Democrats have shifted sharply to left in recent years since the financial crisis.

By contrast, President Trump is offering a continuation of his tax-cutting and deregulating policies that have contributed to a strong stock market performance and an isolationist philosophy that has divided the US and set America at odds with many of its former allies. The Republicans are focusing on the Democrats‘ plans, attacking them as too radical. The party’s agenda includes higher taxes for individuals and companies.

The key, as ever, is not just the Presidential election but whether Congress swings the same way as the White House or leaves Washington divided. A clean sweep is not always a good thing for investors and markets can benefit from gridlock if it makes unhelpful policies harder to implement.

Later this week we will get further insight into the health of the US economy as we approach election day. Friday is non-farm payrolls report day. Last month US employers added 1.4 million jobs, less than the 1.8 million added in July but evidence that the economy is still recovering, if fitfully, from the spike in jobless claims caused by lockdown earlier in the year.

Investors have been concerned that the rate of recovery is too slow, however, raising concerns that the pandemic will lead to a low-growth, low-inflation environment for the foreseeable future.

It’s the same story on this side of the Atlantic, with further evidence that the Eurozone is struggling to avoid deflation. Inflation in August fell below zero for the first time in four years. The expectation is that the ECB will expand its bond buying programme even further in December and to cut interest rates even further into negative territory if inflation remains on the floor.

There was some partial good news this week from the European Commission, which said that its Eurozone economic sentiment indicator had risen to its highest level since the pandemic struck the region in March. It remains below pre-pandemic levels, however, and the rise was the smallest in five months.

Here in the UK, last week’s focus was on the Chancellor’s replacement for the furlough scheme which has been protecting jobs over the summer, but which is due to come to an end at the end of October. The replacement scheme left investors unimpressed last week, with many concerned that it may be too little too late to stop employers laying off significant numbers of workers through the autumn.

But the bigger question in Britain in the remaining weeks of 2020 is whether or not an eleventh-hour deal can be struck to avoid a hard Brexit at the end of the year. As ever with negotiations in Europe, this one is going to the wire, but in the past few days at least the mood music has improved slightly and investors are starting to entertain a belief, however faint, that a deal really can be done.

Yesterday the pound rose by more than 1% on the back of positive Brexit speculation coupled with some of the clearest hints yet that the Bank of England is not considering negative interest rates for the time being. Interest rate differentials between countries are one of the key drivers of currencies and keeping UK rates above zero has been one of the explanations for why the pound has not drifted lower on pandemic and Brexit concerns.

This week, the Bank’s deputy governor Dave Ramsden, said that there were no plans to use negative rates imminently. That poured cold water on speculation that the Bank’s recent exploration of the implications of negative rates might be a prelude to their implementation.

A key measure of the UK economy is the health of its housing market. Here, at least, the news seems positive, with mortgage approvals climbing to a 13-year high in August. The market has been supported by a stamp duty holiday, which runs until next March. A stronger housing market has knock-on effects in the construction sector and is a positive for the sale of housing-related goods like furniture and carpets.