Week in Review: FTSE 100 plunges as global coronavirus cases exceed 12 million

FTSE NEWS

The FTSE 100 plunged sharply on Thursday (9 July) following news that the number of global coronavirus cases had broken through 12 million and were still rising. London’s leading index ended the day down 1.73% at 6,049.62.

• IHS Markit’s UK regional PMI figures will reveal how businesses in each of the UK’s four countries are holding up during coronavirus on Monday (13 July).
• On Tuesday (14 July), the Office for National Statistics (ONS) releases an estimate for May’s monthly GDP.
• Think tank the Resolution Foundation releases its latest Earnings Outlook on Wednesday (15 July), looking at current developments in pay. Wage growth is a key indicator of economic health.
• Unemployment has remained low throughout coronavirus. We will see if that is still the case when the ONS publishes unemployment data for May on Thursday (16 July).
• On what is a relatively quiet Friday (17 July), a special European Council meeting of EU heads is taking place to discuss its coronavirus recovery plan and the new budget.

SECTOR IN FOCUS

Investors flocked to housebuilder shares this week after the government announced a tax break for people buying a new home. On Wednesday (8 July), Chancellor Rishi Sunak confirmed homebuyers purchasing a property in England and Northern Ireland worth less than £500,000 would be exempt from so-called stamp duty until the end of March. It is hoped the move will inject life into the UK’s flagging housing market, which is still in recovery mode after being effectively closed through much of lockdown. The tax break should also stimulate demand for new-build properties, which would act as wind in the sails for UK-listed housebuilders such as Barratt Developments plc (BDEV), Taylor Wimpey plc (TW), Persimmon plc (PSN) and Berkeley Group Holdings plc (BKG), to name but a few.

ECONOMIC UPDATE

Inflation fell to a four-year low of 0.5% in May as the government lockdown led to decreased demand for items such as fuel, clothing and footwear. Low inflation is typically welcomed by households, as it means prices are not rising too quickly. However, the government is not such a fan as it generally means people are consuming fewer goods, which can have a negative impact on economic growth. But with large swathes of the economy now reopen again, many commentators believe there could be a spike in inflation, although whether that is reflected in the ONS’s June data on Wednesday (15 July) remains to be seen.

FUND WATCH

So-called active funds, where a human manager picks stocks on your behalf, tend to grab all of the limelight when it comes to socially responsible investing. However, there are cheaper passive options, operated by computers, out there, too. Vanguard ESG Developed World All Cap Equity Index GBP Acc (IE00B76VTN11), for example, invests in socially conscious firms, as defined by the FTSE Developed All Cap ex Controversies/Non-RenewableEnergy/Vice Products/Weapons Index, for an ongoing charge of just 0.2%.

COMPANY ANNOUNCEMENTS

14 July – Ocado Group plc’s (OCDO) shares have soared by nearly 58% since the start of lockdown as large numbers of people were forced to do their grocery shopping online. As a result, Ocado boasted a record 1.7% share of the grocery market at the end of last month. Its half-year results, published on Tuesday (14 July), will likely reflect its recent success.

15 July – Dixons Carphone plc’s (DC) turnaround plans, which involve closing 531 of its Carphone Warehouse outlets, have won over some analysts of late, including those at Liberum and Citi. Though we will have to wait until Wednesday (15 July), when the retailer publishes its preliminary results, to see whether its plans have positively impacted its bottom line.