The FTSE 100 dropped 1.5% to 6,185.62 on Thursday (13 August) as investor profit taking put an end to the blue-chip index’s recent rally.
SECTOR IN FOCUS
Sometimes a number tells us more than 1,000 words could ever do. That sprung to mind this week as TUI AG (TUI), the Anglo-German tour operator, reported a 98% plunge in revenue in the third quarter, which encapsulates perfectly the destructive effect coronavirus has had on the travel industry. Many commentators agree that it will be some time before the sector is out of the woods, with reduced traveller numbers putting a strain on revenues for some time. That could also have a knock-on effect for other firms that rely on tourists and open air routes, such as hotels, restaurants and car rental firms.
The UK officially plunged into recession on Wednesday (12 August) after figures showed lockdown caused the economy to shrink 20.4% in the second quarter.
It means the UK has now suffered the biggest economic shock of any of the G7, a club of rich nations made up of Canada, France, Germany, Italy, Japan, the UK and the US.
A recession is defined as two consecutive quarters of economic decline.
Experts believe the UK has suffered a steeper fall than its rivals because it decided to wait longer than most to ease lockdown.
However, while the quarterly figures look bad, the economy actually grew 8.7% in June, offering hope that the we might already be in recovery mode.
US stocks ended Wednesday (12 August) a stone’s throw off a record high. Whether you see that as a buy or avoid signal depends on whether you think US shares can keep growing at the pace they have been. If it’s the former, then a good way to access US shares is through a cheap tracker fund such as Vanguard U.S. Equity Index GBP Acc (GB00B5B71Q71). It invests in US large-cap firms and charges an ongoing fee of 0.1%. It has returned nearly 106% in five years.
17 August – FTSE 250-listed sausage maker Cranswick plc (CWK) announced a major lift in revenue in the year to 28 March, allowing it to increase its dividend by 8% to 60.4p a share in June. Shareholders will want to see that progress continued when it reports its interim results on Monday (17 August), although the firm will no doubt be impacted by Covid-19.
18 August – A healthy trading update in July will give Persimmon plc (PSN) shareholders encouragement ahead of the housebuilder’s interim results on Tuesday (18 August). Like many income-paying stocks, Persimmon’s plans for its dividend will no doubt be a key focus.