Week in Review: FTSE 100 shrugs off escalating US-China tensions

FTSE NEWS

The FTSE 100 clung onto its earlier gains on Thursday (23 July) despite escalating tension between the US and China, the world’s only superpowers. London’s leading index finished up by a wafer-thin 0.07%, to end the day at 6,211.44.

• EY Item Club launches its summer forecast for the UK economy on Monday (27 July).
• On Tuesday (28 July), Zoopla publishes its widely watched house price index for June.
• The Bank of England releases its bank lending data for June on Wednesday (29 July).
• The Society of Motor Manufacturers & Traders updates on the health of the UK’s car manufacturing sector on Thursday (30 July).
• The Office for National Statistics will release fourth quarter GDP figures for the UK regions and countries on Friday (31 July).

SECTOR IN FOCUS

While most sectors have struggled throughout the coronavirus crisis, US tech stocks* have soared, with many of the Silicon Valley giants now trading at record or near-record highs. In fact, on Monday (20 July) alone Amazon.com Inc (AMZN), Tesla Inc (TSLA), Microsoft Corporation (MSFT), Apple Inc (AAPL), Alphabet Inc (GOOGL), Facebook Inc (FB) and Netflix Inc (NFLX) shot up in value by an astonishing $291.7bn (£231.5bn). To put that into context, drug maker AstraZeneca (AZN), the UK’s largest listed company, is worth roughly £115bn at the moment. As an investor, the question of whether or not to back the major US tech players is becoming increasingly difficult. On the one hand, many argue the sector has become overvalued but, on the other, their shares keep rising. So, ultimately, it comes down to whether you believe these firms have enough growth potential left in them to make investing worthwhile.

*Please note trading US stocks incurs additional costs and requires the completion of a W8-BEN document in advance. The W8-BEN is valid for three years.

ECONOMIC UPDATE

Ministers have admitted a trade deal with the EU is still some way off, bringing closer the prospect of the UK having to trade with the bloc on less favourable terms from December 31.
A report this week in the Telegraph claims that the UK and EU are still some distance apart on major issues such as fishing rights, competition rules and the future role of the European Court of Justice in UK affairs.
Prime Minister Boris Johnson has threatened to walk away from the talks unless an outline deal is struck by 31 July, meaning there is little more than a week left for both sides to compromise. However, sources believe there will still be scope to strike a deal later in the year.
Failure to do so, however, would result in taxes being applied to goods flowing between both the UK and EU, something both parties want to avoid.
It is thought such an outcome would be bad economically for both the UK and the EU.

FUND WATCH

With tech stocks rallying at present, it’s understandable that many people would want to add some exposure to the sector in their portfolios. However, as we set out above, it can be notoriously difficult to pick the winners in the tech sector. Therefore, you might want to consider investing in a specialist technology fund managed by an expert. Polar Capital Global Tech I Inc (IE00B42W4J83) is one of the most popular and respected tech funds, returning more than 263.5% to investors in the past five years. It charges an ongoing fee of 1.13%.

COMPANY ANNOUNCEMENTS

28 July – Analysts expect demand for Greggs plc’s (GRG) popular sausage rolls and vegan steak bakes to surge now many of its stores have reopened. However, its interim results, published on Tuesday (28 July), are likely to show a big fall in revenues as a result of it remaining closed through much of lockdown.

30 July – With its shares currently trading at a seven-year low, it’s tough being a Lloyds Banking Group plc (LLOY) shareholder at the moment. And with interest rates at historic lows and the economy plagued by coronavirus uncertainty, there is little to suggest the bank’s interim results on Thursday (30 July) will bring much joy to investors.