06 March 2020
The FTSE 100 suffered another painful day of losses on Thursday as worries about the coronavirus outbreak once again spooked markets. By close of play, the UK’s blue-chip index was down 1.56% at 6,708.99, while the FTSE 250, often seen as the barometer for the health of the UK economy, was down 2.15% at 19,317.85.
Next week starts relatively low-key, with revised Japanese GDP figures the only notable event on Monday (9th March). However, Tuesday (10th March) is packed with potentially market-moving events, with six states holding presidential primaries in the US and the European Union set to announce 2019 growth figures for the block. Wednesday (11th March) is set to be the biggest day in the UK’s financial calendar, with new Chancellor Rishi Sunak set to deliver his first Budget. The Treasury has reportedly caved into pressure by Tory members over mooted cuts to higher-rate pension tax relief, although the new man in Number 11 is reportedly eyeing an increase to fuel duty. Also on Wednesday, the Office for Budget Responsibility will give its latest economic and fiscal forecasts for the UK economy. The European Central Bank has a big call to make on Thursday (12th March) over whether to slash rates in order to avoid a Coronavirus-induced economic slowdown. The US Federal Reserve did exactly that this week due to concerns the outbreak could tip the US into a recession. The Office for National Statistics will update its analysis on UK productivity on Friday (13th March).
SECTOR IN FOCUS
The UK’s so-called ‘Big Four’ supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – no longer rule the roost as they once did. These days they face stiff competition not only from German discounters Aldi and Lidl, but also from digitally-savvy upstarts such as Ocado Group PLC (OCDO). Their plight was brought to the fore once again this week after industry data from Kantar showed that Sainsbury PLC (SBRY) was the only one of Big Four to report year-on-year sales growth in the 12 weeks to 23 February, rising 0.3%. Market leader Tesco (TSCO) suffered a 0.8% sales dip over the same period, while sales at Asda and Morrisons (MRW) were down 1.2% and 2%, respectively. By contrast, Lidl was the fastest-growing supermarket for the first time since 2017 with sales up 11.4%, while Aldi recorded growth of 5.7%. In the coming months, investors will be paying close attention to how the coronavirus outbreak affects the earnings of UK supermarkets. Reports of worried customers stocking up on hand sanitiser, soaps and food supplies could boost sales but, on the other hand, disruption to global supply chains as a result of the epidemic may have a limiting effect.
On Wednesday (11th March), we find out whether the Coronavirus outbreak has caused any immediate and significant damage to the UK economy when the Office for National Statistics publishes its monthly GDP figures for January. The economy was stagnant in the final three months of 2019 but posted a better-than-expected increase of 0.3% in December.
During times of market volatility and uncertainty, it can sometimes pay to spread your money out across a number of different countries. T.Rowe Price Global Focused Growth Equity (TRXXV) invests in firms all over the word and looks for companies that have the potential for strong and sustainable earnings growth.
10th March – Income-seeking investors will be paying close attention to Standard Life Aberdeen’s (SLA) free cash-flow when it reports its full-year results next week. Analysts have suggested the group’s generous dividend is not looking as rock-solid as it once was.
11th March – Insurance giant Prudential (PRU) has in recent weeks become the latest target of activist investors, who are calling on the group to be split in two. The board’s reaction to these demands will no doubt be the main focus of investors when the group reports its final results next week.