Week in Review: Dire warning on UK economy sends shares into a tailspin

FTSE NEWS

The FTSE 100 plunge into the red on Thursday (14 May) after Bank of England governor Andrew Bailey warned that the UK’s economy could suffer long-term damage from the coronavirus shutdown. London’s index of blue-chip companies was down 2.75% to 5,741.54 at closing.

• Rightmove kicks off the week, publishing its latest house price index on Monday (18 May). Unlike its rivals, this index measures asking prices, rather than sale prices, therefore it gives good insight into consumer confidence.
• Unemployment is predicted to rise sharply in the coming months due to the destruction Covid-19 has caused to the economy. As a result, March’s employment figures, published on Tuesday (19 May) by the Office for National Statistics (ONS), will be keenly watched.
• On Wednesday (20 May), trade body UK Finance is set to publish its latest card spending data, another indicator of consumer confidence.
• Thursday (21 May) will see HM Revenue & Customs reveal how many property transactions were completed in April.
• Retail is another sector that has been hit hard by the pandemic, meaning the ONS’ April sales figures for the industry, to be released on Friday (22 May), are likely to disappoint.  

SECTOR IN FOCUS

As part of the lockdown, the Government stopped people moving homes to slow the spread of the virus. According to official figures, that put the brakes on 450,000 moves. However, on Wednesday (13 May) the Government lifted the curbs, meaning people could once again arrange viewings for properties. The move was hailed as a major short-term boost for the property market and, in particular, estate agents such as Foxtons (FOXT), Purplebricks (PURP) and M Winkworth (WINK). Whether the move makes any difference to the long-term health of the market, though, remains to be seen.

ECONOMIC UPDATE

With most shops closed and people confined to their homes during lockdown, there has been an inevitable slowdown in consumer spending and, as a result, prices have fallen. Last month, inflation fell to 1.5% - well below the Bank of England’s target of 2% - and some experts believe prices could fall even further when the Office for National Statistics (ONS) publishes April’s inflation data on Wednesday (20 May). Having said that, prices are expected to rise relatively sharply once the economy is back up and running.

FUND WATCH

In terms of performance, responsible investing funds have held up relatively well throughout the coronavirus crisis. One you might want to consider is Kames Ethical Equity GBP B Acc (GB0007450884), which screens out companies in sectors such as oil & gas, defence and tobacco.

COMPANY ANNOUNCEMENTS

20 May – Marks & Spencer (MKS) started the slow process of emerging from lockdown this week after announcing it had reopened 49 of its cafes. However, coronavirus has hit the retail sector hard and therefore expect this to be reflected in its full-year results on Wednesday (20 May).

21 May – Speculation is growing that Royal Mail (RMG) could be a potential takeover target after Daniel Kretinsky, the Czech billionaire who owns Sparta Prague football club, snapped up a 5% stake in the postal firm. Investors will be looking for Royal Mail to address this speculation when it publishes its full-year results on Thursday (21 May).