07 May 2020
The FTSE 100 held strong on Wednesday (6 May) despite dismal data showing construction output suffered its biggest ever slump in April. London’s blue-chip index ended the day up 0.06% at 5,852.82.
SECTOR IN FOCUS
It’s a difficult time to be a bank. The Bank of England’s decision to slash rates in March will likely eat into margins while the damaging economic effect of coronavirus could result in a spike in the number of people unable to pay their debts. These concerns were reflected on Wednesday (6 May), when a number of challenger banks updated investors. Virgin Money (VMUK) reported a 57% fall in profit after revealing it had set aside £232 million for bad debts – an increase of £155 million year-on-year. Similarly, OneSavings Bank (OSB) warned more people could struggle with repayments if the lockdown continued much longer. Separately, Metro Bank (MTRO) sought to reassure investors of its resilience during these troubled times despite announcing a 4% year-on-year fall in both lending and deposits.
It won’t become clear how much damage Covid-19 has caused to the UK’s economy for some time. However, we will get an inkling when the ONS releases the UK GDP data for the first quarter on Wednesday (13 May). As this data captures the early days of the lockdown, it is likely that the data will show a dip in national economic output. Looking further ahead, the ONS, the UK’s chief statistics bureau, has already warned that the country’s economy will suffer a “significant” decline in the first half of the year.
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13 May – Tour operator TUI Group (TUI), which has been forced to cancel holidays for more than 900,000 people as a result of the coronavirus, received a much-needed boost this week as its Chinese arm started offering travel packages again. While movement remains restricted in key markets such as Europe, it provides some positivity ahead of the group’s interim results on Wednesday (13 May).
14 May – Investors have not heard much from WH Smith (SMWH) since the coronavirus forced it to tap up shareholders for £166 million to shore up its balance sheet last month. The retailer’s full-year results, published on Thursday (14 May), will provide it with a good opportunity to reassure investors of its ability to weather the current crisis.