Hello and welcome to our latest client update at the end of another week which brought the usual mixture of good and bad news, but which ended positively for the majority of world stock markets.
The stock market figures we quote were correct at the close of business (in the relevant market) on Wednesday evening, while the commentary was written on Thursday morning and then, as always, revised after the Government’s daily briefing on Thursday evening.
The Latest News
As we remarked last week, lockdown seems to have now settled to a regular mix of good and bad news. This last week was no exception.
The impact of the virus was clearly shown when China reported its first ever fall in GDP, with a drop of 6.8% in the first quarter of the year. As we reported last week, far worse is expected in the UK and other Western economies when the figures for the second quarter are revealed.
In the US, 4.4m more people became unemployed, taking the total number of jobless claims to over 26m. To give just one example, Disney stopped paying more than 100,000 workers.
It was also a bad week for the price of oil, which continued to drop dramatically as demand all but dried up. At one point, the price turned negative for the first time ever, as storage space around the world became full.
In the UK, there was the usual gloom on the high street as Topshop and Miss Selfridge said they could close 100 shops. Chancellor Rishi Sunak was ‘not persuaded’ that the Government should guarantee 100% of loans to companies, despite widespread criticism of the number of businesses getting support from the banks.
Sunak did, though, extend his Coronavirus Loan Scheme to all financially viable UK businesses, allowing companies with a turnover in excess of £45m to apply for up to £25m of finance.
On Monday, the Government’s furlough site went live, with 1m UK employees being registered for the job retention scheme on the first day. This week also brought help for start-ups, as the Treasury announced £1.25b ‘to protect firms driving innovation in the UK.’ This comprised a £500m loan scheme for ‘high growth firms’ and £750m for SMEs focused on research and development.
Cheaper clothes and fuel saw UK inflation drop to 1.5% and, proving the old ‘it’s an ill wind’ adage, US giant Netflix revealed that they had added 16m new subscribers in the current crisis.
The Stock Markets
Like the previous week, the week just ended was a much more ‘sensible’ one on the world’s stock markets, with all the major markets once again moving in a relatively narrow range. Fortunately, for most markets that movement was upwards.
Three markets led the way, rising by 3% in the week to Wednesday evening. Those were the Russian and Indian markets, and the UK’s FTSE-100 index of leading shares, which closed at 5,771. The FTSE is up by more than 13% since the gloomy days of mid-March when the full impact of Covid-19 was just being appreciated and Chancellor Rishi Sunak was introducing the first of his measures to support the economy.
In Europe, the French and German stock markets both rose by 1% in the week, and China’s Shanghai Composite was up by a similar amount. The US Dow Jones fell just 24 points in the week, leaving it unchanged in percentage terms at 23,476.
The only major markets to record falls were Hong Kong – down 1% to 23,894 – and Japan’s Nikkei Dow, which dropped 2% to finish Wednesday at 19,138.
The pound was down against the dollar in the week, falling 2% to trade at $1.2313.
Several of Thursday morning’s papers picked up on the ‘light at the end of the tunnel’ theme. However, many of them also reported that some form of social distancing may have to stay in force for the remainder of this year. In Germany, wearing masks is now compulsory on public transport, with most states also making masks mandatory while shopping.
That’s going to mean more good news for Amazon and more bad news for the high street and we’d suggest that we are now going to see a world gradually adapting to living with the virus as all countries race to develop a vaccine.
Like every business, we will need to adapt to the ‘new normal’: in the short to medium term that will certainly mean doing more business remotely, using technology like Zoom. But, we will emphatically still be here to answer your questions and help you cope with the changing circumstances.
One thing the ‘new normal’ will demand is more – and better – communication with clients. To this end, we will continue to keep you up to date each week with our thoughts on what is going on in the world and what action you need to take (or don’t need to take just now). We will therefore continue to be in contact with you every step of the way as the markets and economy gradually recover.