Week in Review: FTSE 100 rebounds as Bank of England warns on UK economy

FTSE NEWS

The FTSE 100 rebounded from early losses on Thursday (26 March) despite the Bank of England (BoE) warning that the coronavirus could have a damaging long-term effect on the economy. The index ended the day up 2.24% at 5,815.73.

• The BoE kicks off the week on Monday (30 March) when it publishes the latest borrowing and deposit statistics for households and businesses. The so-called ‘Money and Credit’ figures are watched closely by market observers as they reveal economic trends and developments in the banking system.
• Complimenting nicely the BoE’s Money and Credit figures from the day before, on Tuesday (31 March) the Office for National Statistics (ONS) will publish UK household expenditure statistics for the fourth quarter of 2019. These reveal what families are spending on things like transport, housing costs and energy among other things.
• The latest IHS Markit/CIPS UK Manufacturing PMI update, published on Wednesday (1 April), is expected to confirm a sharp fall in manufacturing activity for March amid mass temporary business closures to combat the spread of the coronavirus.
• On Thursday (2 April), the British Chambers of Commerce’s latest quarterly economic review will give investors an update on how Covid-19 is affecting UK firms as well as the wider economy.
• The US Labor Department will, on Friday (3 April), publish the latest stats on employment levels in the States.

SECTOR IN FOCUS

The UK’s largest housebuilders made the headlines this week after cancelling their dividends and shutting down construction sites, despite being exempted from the coronavirus lockdown. Between them, Taylor Wimpey plc (TW.), Barratt Developments plc (BDEV), Bellway plc (BWY) and Persimmon plc (PSN) shut down hundreds of sites across the country over concerns for their workers’ health. Despite the announcement, the shares of all four firms were up compared to the start of the week.

ECONOMIC UPDATE

The global economy is expected to suffer a huge slump in the first half of 2020 as the coronavirus has led to the temporary closure of entire industries. Therefore, all eyes will be on the ONS’ estimate of UK GDP for the first three months of 2020 on Tuesday (31 March). While the cut off point for this data will miss out some of the worst economic effects of the virus so far, it will provide us with insight as to the state of the UK economy before the Government imposed lockdown.

FUND WATCH

The Shanghai Stock Exchange has outperformed its European or US counterparts in recent times, largely it seems because of the Chinese government’s decisive efforts to combat the spread of the coronavirus. If you want to increase your exposure to the country, you may want to consider Investec Asia Pacific Franchise I AccGBP (GB00B1XFJD49), which has a 22% weighting towards Chinese shares.

COMPANY ANNOUNCEMENTS

The Financial Conduct Authority has advised firms to delay the publication of their results due to the coronavirus outbreak. However, at the time of writing, both companies below were pressing ahead with their results as planned.

31 March – Engineering firm Smiths Group (SMIN) showed a heart-warming sense of civic duty this week by revealing plans to share instructions on how to make its ventilators with other manufacturers to help those infected with the coronavirus. That aside, investors will be hoping the momentum the firm gathered towards the end of last year will be reflected in its interim results.

2 April – Saga plc’s (SAGA) preliminary results are expected to make for difficult reading on Thursday (2 April), with the over-50s services provider revealing this month that it expects to take a £10-15m hit from the coronavirus. Earlier this month, the holiday and insurance provider put the brakes on its cruise operations until May to help stop the spread of the virus.