Hello, and welcome to our latest – and last – Weekly Client Update. As we mentioned last week, the world gradually seems to be returning to a ‘new normal’ so now seems to be an appropriate time to end these updates. Thank you to all our clients who have commented on them, and we hope they have entertained and informed you through some of the most turbulent times any of us can remember.
As always in the update, the stock market figures we quote below were correct at close of business in the relevant market on Wednesday evening, with the commentary written very early on Thursday morning.
The Latest News
Over the weeks we have been writing this update, there has been a constant mixture of good and bad news. Of late, ‘bad news’ has largely concerned itself with job losses and the end of last week was no exception, bringing the news that Boots and John Lewis are to cut a combined 5,300 jobs in the UK.
With high street footfall in June reported to be less than half the level of last year – even as stores re-opened – there will, sadly, be more job losses to come in the retail sector.
In the US, Brooks Brothers – reputed to ‘have dressed 40 Presidents’ – filed for bankruptcy, and the big banks in North America were reported to have set $28bn (£22.2bn) aside for bad debts caused by the crisis. With the world’s biggest companies reportedly set to borrow $1tn (£790bn) this year as they try to weather the crisis, it is easy to see losses on that scale.
In the UK, the Government announced that Chinese telecoms giant Huawei would be banned from participating in the country’s 5G network on security grounds. The Chinese ambassador to the UK criticised the move as “disappointing and wrong” and there is the possibility that UK companies operating in China and Hong Kong will face retaliatory action.
But, as always, there has been plenty of good news to set against the bad. This week brought the news that the Chancellor is considering plans to create ten ‘freeports’ in towns and cities across the UK, which would benefit from taxation and regulatory changes. These might include increased capital allowances, decreases in stamp duty and business rates, and a relaxation of the planning laws. Given that the Chancellor’s constituency is in North Yorkshire, you would not be surprised to see Middlesbrough on the list.
Pools and gyms re-opened in England with hopes in Scotland that we will also follow soon and there was the encouraging news that some companies are set to turn down the £1,000 per returning employee offered to them in the Chancellor’s Summer Statement. Primark – who would have been paid £30m – said that it had brought its employees back to work and would not be asking for the payment.
The week ended, of course, with the news that masks, already mandatory in Scotland, will be mandatory in shops in England from Friday 24th July. They won’t, though, be required in offices.
The Stock Markets
On the whole, it was a good week for the stock markets we report on in the update. Only a few moved downwards, and those that did were only down slightly. After its excellent performance last week, China’s Shanghai Composite index was down 1% to 3,361. The Hong Kong market fell 2% to 25,482, but the other two leading markets in the Far East – Japan and South Korea – both rose 2% to 22,946 and 2,202 respectively.
In Europe, the German DAX index was up 3% to 12,931 and the French market was also up by a similar amount.
America’s Dow Jones index was up by 3%, closing Wednesday evening at 26,870 while the more broadly based S&P500 index gained 2% to 3,227.
In the UK, the FTSE 100 index of leading shares was up 2% to finish Wednesday at 6,293, while the pound had a quiet week against the dollar and ended unchanged in percentage terms at $1.2585.
Looking back to the middle of March, the FTSE stood at 5,080, the German DAX index at 8,450 and the Dow Jones index at 19,899. Very clearly, world stock markets have recovered well from those low points of four months ago. No one though, can pretend that there will not be bumps in the road ahead.
Similarly, there is the simple question of how all the Government support for individuals and businesses will be paid for. In the UK, Wednesday morning’s papers carried stories that the Chancellor has ordered a review of Capital Gains Tax, with commentators suggesting he might raise CGT to pay for some of the Coronavirus measures.
Our belief, though, is that the Government will place its trust in a booming, resurgent economy to pay the bills – witness the announcement on freeports we mentioned above.
Whatever the Chancellor does, we probably have to accept that the fabled ‘V-shaped recovery’ – the economy recovering as quickly as it declined – will not happen for all parts of the economy. Some sectors of the economy are going to recover much more quickly than others, but elsewhere, the pandemic will leave permanent scars. The pandemic will have undoubtedly accelerated the pace of change in some sectors of the economy.
But, as we have always said, new companies will find new ways to bring new products to new markets. A year, two years, from now, the UK economy will undoubtedly look different but we remain convinced that both the UK and the wider world economy will be well on the way to recovery. We were optimistic when the crisis started, and we remain firmly optimistic as we finish our weekly updates on it.
And now to lighter news…
Last week we reported on the Summer Statement, and the temporary cut in VAT for the hospitality sector. Well, you can raise a glass to Rishi in Wetherspoon’s where the cheapest pint of beer – Ruddles Bitter – will now cost just £1.29.
So much for your drinking arm: it appears that consumers have had rather different parts of their body on their minds during lockdown. Plastic surgery clinics around the world – having adopted stricter hygiene measures – have reported a surge in business during the Coronavirus outbreak.
Patients have realised that they can recover at home with no one seeing the immediate after-effects of the surgery – and if they have to go out, they can wear a mask. Clinics in the US, South Korea, Australia and Japan have all seen a sharp rise in patients, with treatments including lip fillers, Botox, nose jobs and facelifts proving popular.
And with that ‘uplifting’ news, we will leave you. Thank you once again for reading our Weekly Client Update over the past weeks and months. Looking forward, it will be our plan to continue to be in regular communication with you, but not as regular as on a weekly basis! However more of that to follow in the next few weeks. In the meantime, thank you for your continued support and do also continue to keep safe and well.