Last Week in the City

Garry White looks at the events that have shaped equity markets this week (26 to 29 May 2020).

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  1. Garry White

The new cold war between Beijing and Washington took a turn for the worse after China forced through a new law in Hong Kong that critics say restricted freedoms.

As countries over the world try to ease lockdown restrictions to boost moribund economies, a number of countries, including South Korea, Iran and Sri Lanka, were forced to reimpose restrictions after easing the measures caused a spike in infections. However, markets are hopeful that restrictions will ease as the year progresses.

The FTSE 100 was up 2.4% over the course of the week by mid-session on Friday, with the FTSE 250 up 4%.

Charles Stanley’s Investment Strategy Committee met this week – you can read its conclusions here.

Charles Stanley Radio

To support our remote living and working lives, we have launched Charles Stanley Radio to bring you the latest news from Charles Stanley.

Listen to expert commentary from our research team and analysts, informal Q&As with our colleagues to hear about their experiences adapting to this new way of working and specialist content from our partners. The latest episode is a personal view from Garry White on how ‘too much news’ can become a real problem

Fireside chat with Garry White: How to read the news. In this episode, Garry discusses how consuming too much news can have a negative impact on mental health and how he copes with constant negative headlines. Listen here.

The radio page with all previous recordings can be found here.

Retirement planning

While retirement is a brilliant opportunity, it is also the end of your working life and brings with it an immediate change in lifestyle – both financial and emotional. Graeme Dreghorn looks at planning this major life event here.

Covid-19

Global deaths from the coronavirus outbreak have passed 360,000, according to the Johns Hopkins Coronavirus Resource Center. The US remains the worst-affected nation, followed by the UK, Italy and France.

All non-essential retailers will be able to reopen in England from 15 June, Prime Minister Boris Johnson announced, as part of plans to further ease the lockdown. However, the move is "contingent on progress in the fight against coronavirus", and retailers will have to adhere to new guidelines. Outdoor markets and car showrooms will be able to reopen from 1 June. You can read the new retail rules unveiled by the government here.

Other relaxations in the rules include allowing groups of up to six people from different households to meet outdoors or in a garden while continuing to practise social distancing with those who do not live in the same household. It is still forbidden to meet friends and family inside a home.

Norway and Denmark will resume free travel between the two countries, creating a travel bubble that excludes Sweden, where the number of Covid-19 infections is higher.

Greece said it will open to visitors from 29 countries from 15 June, days before its peak tourism season begins. Spain will reopen to overseas tourists from July.

However, the perils of easing lockdowns too early were seen in a number of countries:

  • Around 200 schools in South Korea closed just days after they reopened, after a spike in virus cases. Thousands of students returned to school on Wednesday, but a day later 79 new cases were recorded, the highest daily figure in two months.
  • Iran recorded its highest tally of new Covid-19 infections since early April, with 2,819 more people testing positive in 24 hours. The increase in new infections came after measures to restrict the spread of the disease were eased.
  • Sri Lanka will reimpose selective lockdown restrictions from Sunday to restrict large gatherings after recording its biggest daily surge in Covid-19 infections

Economics

About 8.4 million workers are now covered by the government's furlough scheme, up from 8 million in the previous week, the Treasury said. Claims for subsidies filed by employers rose to £15bn from £11.1bn. A similar scheme for self-employed workers saw 2.3 million claims made worth £6.8bn. Changes are expected to be announced this weekend, which could result in a rise in official UK unemployment figures.

US consumer spending suffered another month of record decline in April as the Covid-19 crisis hit demand. Consumer spending, which accounts for more than two-thirds of US economic activity, plunged 13.6% over the month.

Canada's growth in April plunged by a record 11% from March, as large sections of the economy were shut down to fight the Covid-19 outbreak.

India’s economy grew at its slowest rate in at least eight years in the first quarter, as the pandemic weakened already sluggish consumer demand and investments. Its economy grew 3.1% in the last quarter, compared with 5.7% a year ago.

Brazil's economy contracted in the first quarter by the most in nearly five years, falling 1.5% quarter-on-quarter.

Geopolitics

Beijing responded with defiance to international criticism of its controversial Hong Kong national security law, threatening countermeasures against the UK and the US. Beijing’s legislature approved the sweeping anti-sedition legislation and China’s foreign ministry spokesman Zhao Lijian said Hong Kong is “purely an internal Chinese matter” and that “no other country has the right to interfere”. The US has signalled its intention to revoke Hong Kong’s special trade and economic status, under which the city is treated as separate from China on terms that have underpinned Hong Kong as a global financial hub. 

London and Brussels are locked in a “stand-off” over a post-Brexit fisheries agreement as time runs out for the two sides to strike a trade deal. Cabinet minister Michael Gove conceded there remained “significant contention” on the issue – but he reiterated that the UK would reject any attempt to extend the transition period.

Technology

North Korea accused the US of smear tactics after Washington renewed accusations that Pyongyang was responsible for malicious cyberattacks. Cybersecurity is one of the few areas where significant growth is expected in the next few years, as China, South Korea and Russia engage in cyberwar with the west – and criminals target homeworkers. Garry White looks at the issue here.

Energy

Oil prices edged lower after US inventory data swelled, while worsening US-China tensions also raised concerns about an escalation in the trade war and its potential economic hit. Increased crude stocks were driven by a sharp acceleration in the volume of imports clearing customs, with around half of it discharged from tankers loaded with Saudi crude ordered at the peak of the volume war in March and April. Brent crude prices fell by about 1.3% over the week by mid-session on Friday to trade at around $34.67 a barrel by mid-session on Friday.

Vehicles

In a move that highlights the woes of global carmakers, Renault plans to eliminate about 14,600 jobs worldwide and lower production capacity by almost a fifth, as part of cost reductions aimed at outlasting the downturn that has rocked the global auto industry.

British car manufacturing came to a screeching halt in April, down 99.7% against the same month last year. The country manufactured just 197 cars.

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