Week in Review: FTSE 100 declines as travel stocks take a hit

FTSE news

The FTSE 100 finished the day down on Thursday (3 June) as travel firms faced bad news from changes to the UK Government Covid travel green list. The index finished the day 0.6% lower at 7,064.35.

• On Monday (7 June) Halifax release its latest house price index.
• The EU publishes its third estimate of Q1 GDP on Tuesday (8 June).
• The Economist Intelligence Unit publishes its latest global livability index on Wednesday (9 June), looking at places around the world with the best and worst living conditions.
• On Thursday (10 June) the latest US inflation data is published.
• Finally, on Friday (11 June) the Office for National Statistics (ONS) publishes its monthly UK GDP estimates for May.

Sector in focus

The UK’s biggest supermarket Tesco plc (TSCO) is facing a £2.5 billion bill thanks to a European Court of Justice (ECJ) ruling around how it pays its workers.

In a dispute over how much it pays workers in different areas of its business, the ECJ found that paying its in-store staff £3 less per hour than its warehouse employees was discriminatory. The supermarket now faces the prospect of paying £2.5 billion in compensation to its employees.

This is not the only headwind facing Tesco, however. From a report compiled by Edge by Ascential, it is predicted that the supermarket will be knocked off its perch as the largest retailer in the UK by none other than technology giant Amazon (AMZN).

Edge by Ascential predicts Amazon’s annual sales will reach £77.1 billion by 2025, while Tesco’s will be £76.1 billion. Amazon has boosted its groceries sales by 18% in the past year, posing a considerable threat to Tesco’s dominance of the UK retail market. For now, however, it is still only ranked 19th among the UK’s food retailers.

Economic update

Oil has hit a one-year high as demand surges back thanks to reopening western economies. Brent Crude, one of the core measures of oil prices, reached $71.48 a barrel on Wednesday, its highest level since January 2020.

It marks a profound reversal on last year, when the bottom fell out of the market thanks to coronavirus. At one point the situation was so bad the price of a barrel of oil went negative, as storage facilities looked to unload excess supplies.

The price has since rebounded and looks set to continue marching upwards. As a result OPEC+, the cartel of oil producing countries, has agreed to increase its supply in order to prevent runaway prices, but has shown restraint in doing so too fast.

As a result, end-prices are still rising steeply for consumers, as the oil price feeds into the economy in a number of ways. The RAC reports that petrol prices in the UK are now at a two-year high, while the British Retail Consortium (BRC) says food bills will rise this autumn thanks in part to higher transportation costs for producers.

Fund watch

If you’re interested in investing in technology that is set to usurp incumbent industries, Polar Capital Global Tech I Inc (IE00B42W4J83) could be a good option. This actively managed fund looks to buy shares in companies around the world focused on new technologies and innovation. The fund has returned 274% over five years, although it charges a relatively high fee for this performance, of 1.13%.

ETF watch

If you want to invest in technology at a cheaper price point, the Lyxor MSCI World Info Tech TR ETF (TNOW) could be an option. The ETF tracks the MSCI World information technology index of companies. It has returned 171% in five years and charges an OCF of 0.3%.

Company announcements

8 June – Manufacturing and research firm Oxford Instruments (OXIG) reports its final results on Tuesday (8 June). The firm has had a strong year despite the pandemic. The firm reported revenues modestly ahead of expectations in March, so investors will be on the lookout for a continuation of this trend.

10 June – Retailer Ted Baker (TED) reports its full-year results on Thursday (10 June). The firm had plans underway to restructure its business after significant pre-pandemic difficulties, but this plan has been set back heavily by the events of the last year. Like many retailers it has suffered from enforced closures and shopping restrictions in the past year.