07 August 2020
The FTSE 100 plunged by 1.27% to 6,026.94 on Thursday (6 August) after the Bank of England (BoE) held interest rates and warned the economic recovery from coronavirus might take another 18 months.
SECTOR IN FOCUS
Miners came into focus this week after the price of gold hit $2,000 an ounce for the first time as investors sought safety from volatile markets. Investment platforms have reported a surge in the number of people investing in precious metals such as gold and silver, both of which are considered ‘safe havens’ that are able to hold their value in a market downturn. The spike in the price of gold helped support the share prices of FTSE-listed gold miners such as Polymetal International plc (POLY) and Fresnillo plc (FRES).
The Bank of England (BoE) said on Thursday (6 August) that the economic damage caused by coronavirus will be less severe than it was thought but that the recovery might take longer than expected. The UK’s central bank expects the economy to shrink by 9.5% this year, much less than the 14.5% fall it predicted before.
However, the BoE also warned that the economy would not return to its pre-crisis levels of output until the end of 2021. As a result, it expects unemployment to double to 2.5 million, or 7.5% of the workforce, by the end of the year. Speaking to reporters after announcing a freeze on interest rates, BoE governor Andrew Bailey said: “There are some very hard yards, to borrow a rugby phrase, to come.”
Despite lagging behind their peers since the Brexit vote in 2016, UK stocks and funds that invest in UK stocks make up the foundation of many investors’ portfolios. TB Evenlode Income B Inc (GB00BD0B7D55) is one of the more popular UK-focused funds. It has returned 54.35% in five years and has an ongoing charge of 0.87%.
11 August – Intercontinental Hotels Group plc (IHG) moved quickly to protect its balance sheet from coronavirus by scrapping its dividend before lockdown was even introduced. The group’s upcoming interim results on Tuesday (11 August) will give investors a chance to see if it has in any way helped.
12 August – Coronavirus has brought the travel industry to a shuddering halt, although movement is now beginning to pick up again. Nevertheless, travel group Tui AG’s (TUI) third-quarter update on Wednesday (12 August) is likely to reflect the strain the sector has been under recently.