Week in Review: Historic Royal Dutch Shell dividend cut sinks FTSE 100

FTSE NEWS

• The FTSE 100 index of stocks finished 3.5% down at 5,901.21 points on Thursday. The index was sunk by the news that Royal Dutch Shell (RDSA), down 11.37% on the day, was slashing its dividend for the first time since the Second World War due to severe falloff in demand for oil, because of the coronavirus crisis.
• To kick off next week, the latest Eurozone manufacturing PMIs for April will be published on Monday (4 May) followed by services (5 May) and construction (6 May). All serve as leading indicators of economic activity in a key region.
• Elsewhere, Germany is scheduled to review its lockdown on Tuesday (6 May). An uptick in cases may cause the government there to recommend more caution after a tentative but potentially premature relaxation of restrictions.
• On Thursday (7 May) the Bank of England announces the latest UK interest rate decision. There is likely to be no change, but expect more information on other policy tools such as QE (quantitative easing - the buying of government debt).
• To finish the week, the UK has an unusual bank holiday on Friday (8 May). This was moved from the traditional Monday to commemorate VE Day but thanks to the lockdown will likely be a largely digital celebration and will make for a welcome break for UK markets.
  
  

SECTOR IN FOCUS

The retail sector in the UK and globally has had extremely mixed fortunes during the coronavirus crisis. Thanks to the lockdowns across the globe, companies reliant on footfall have been hit hard by the effective shuttering of this influential sector of the economy. Companies such as Associated British Foods (ABF), owners of fashion retailer Primark, have warned they are essentially making zero revenue thanks to the shutdown. But other players have experienced better fortunes. Sainsbury’s (SBRY) for instance warned it would take a £500 million profit hit but this would be largely balanced out by a massive government waiver on business rates, which means the firm expects to earn the same this year as last.

ECONOMIC UPDATE

At times like this when reading the economic tea leaves through statistical reports, it can be a little difficult to discern what is actually going on. Data reports take time to feed through what’s actually happening on the streets and often give mixed pictures until well after the worst has passed. That’s why it can sometimes be useful to look at some of the more offbeat economic figures. For instance, the Society of Motor Manufacturers & Traders’ UK monthly car reg figures are due out on Tuesday (5 May). This will give a good indication of how many cars are being purchased (which is likely to be extremely low). The motor industry is still extremely influential in the UK with more than 800,000 jobs reliant on the sector.

FUND WATCH

The US has made a relatively strong recovery since the sharp falls witnessed last month. If you wish to gain exposure to US shares, you might want to consider the JP Morgan US Equity Income Net Inc. fund (GB00B3FJQ599), which aims to provide long-term capital by investing in US companies in a variety of sectors.

ETF WATCH

The coronavirus has led to a number of big-name companies either drastically reducing or scrapping their dividends entirely, meaning investors have to search much harder for income-seeking stocks. iShares UK Dividend ETF GBP Dist (IUKD) invests in the 50 highest yielding shares in the FTSE 350 to produce an income for investors.

COMPANY ANNOUNCEMENTS

6 May – It has been a torrid 18 months for Metro Bank (MTRO), which racked up losses of £131 million last year. New chief executive Dan Frumkin says he has a plan to get the bank back on the straight and narrow, and will have another opportunity to reassure investors when it publishes its first quarter results on Wednesday (6 May).

7 May - British Airways’ parent company, International Airlines Group (IAG), is due to publish its first quarter results on Thursday (7 May). Coronavirus has virtually grounded the entire airline industry. Therefore, investors will want to see how the group’s board are managing to balance the books while planes are out of the skies.