Fresh coronavirus restrictions spook investors

FTSE NEWS

A spate of new lockdown restrictions in Europe spooked investors on Thursday (15 October). In the past couple of days, France, Germany and the UK – Europe’s three largest economies – imposed tighter controls on their people to control coronavirus. The FTSE 100 plunged 1.73% lower to 5,832.52 on Thursday, in what was a miserable day for European shares.

• On Monday (19 October), professional services firm EY will publish analysis of all of the profit warnings issued by UK firms during the third quarter. In the first half of the year, a third of UK listed companies downgraded their profit forecasts.
• Bank of England Monetary Policy Committee member Gertjan Vlieghe gives an update on the UK economy on Tuesday (20 October).
• The Office for National Statistics (ONS) reveals inflation figures for September on Wednesday (21 October). The Consumer Price Index fell to a five-year low of 0.2% in August.
• The Confederation of British Industry’s monthly Industrial Trends survey will give an up-to-date snapshot of conditions in the UK’s manufacturing sector on Thursday (22 October).
• On Friday (23 October), the ONS reports retail sales data for September.

SECTOR IN FOCUS

Online fashion firms are cashing in at the moment – but can it last?
This week, ASOS plc (ASC), which is particularly popular with twenty-somethings, reported a 329% increase in profits in the year to 31 August, partly due to soaring demand for casual wear during lockdown.
Fast-fashion rival BooHoo Group plc (BOO) reported a 51% annual rise in profits at the start of the month, despite being embroiled in a controversy over working conditions at its suppliers.
The big question, though, is: can these firms keeping producing the goods?
In short, it all depends on the economic recovery from coronavirus. Data shows that it is young people – the very customers of ASOS and BooHoo – who have suffered most in terms of job losses during the pandemic.
If the recovery slows and the spending power of younger workers is hit, analysts believe ASOS and BooHoo could suffer also.

ECONOMIC UPDATE

Coronavirus has pushed unemployment in the UK to its highest level in more than three years.
Data from the ONS shows that the unemployment rate hit 4.5% in the three months to August, up from 4.1% in the previous quarter.
It means that there are now more than 1.5 million people unemployed in the UK, the highest total since March 2017. Of these, roughly 300,000 are aged 16-24.
There are concerns that this number could rise even higher in the coming weeks with much of the country facing fresh coronavirus restrictions.
Meanwhile, Labour leader Keir Starmer has called for a two-week “circuit breaker” lockdown to stem the rate of infection in the UK.
However, analysts believe this would set back the UK’s economic recovery from coronavirus.
In fact, economic research consultancy Capital Economics predicts that the economy would not reach pre-pandemic levels until 2023 – a year later than expected.

FUND WATCH

Yoshihide Suga, Japan’s new Prime Minister, is expected to usher in a host of economic reforms to improve the country’s competitiveness and ensure it recovers fully from coronavirus. If he is successful, that could have a positive effect on Japanese shares, some experts believe. iShares Japan Equity Index (UK) D Acc (GB00B6QQ9X96) offers a cheap way of gaining exposure to Japanese shares, with its ongoing charge just 0.08%. The fund has returned a little more than 62% in the past five years.

COMPANY ANNOUNCEMENTS

20 October – Analysts at Deutsche Bank and Peel Hunt downgraded Bellway plc (BWY) in August due to concerns over site productivity and spiralling costs. The housebuilder itself has also warned it expects profits to be lower when it reports its full-year results on Tuesday (20 October).

22 October – Coach operator National Express plc (NEX) attracted a ‘buy’ rating from analysts at Peel Hunt after reporting a rise in passenger numbers in September. The firm reports its interims on Thursday (22 October).