Week in Review: Wall Street sell-off drags FTSE 100 into the red

FTSE NEWS

A sell-off on Wall Street dragged European indices deep into negative territory on Thursday afternoon (3 September). The FTSE 100, in the black until an hour before closing, plunged 1.52% lower to 5,850.86.

• The latest round of Brexit trade deal talks between the UK and European Union (EU) begins on Monday (7 September).
• On Tuesday (8 September), the Office for National Statistics (ONS) publishes data on company mergers and acquisitions in the second quarter.
• KPMG and REC update on the health of the UK jobs market on Wednesday (9 September).
• The Royal Institution of Chartered Surveyors takes the temperature of the property market on Thursday (10 September). Data from building society Nationwide this week revealed property prices are once again at a record high.
• On Friday (11 September), the ONS publishes its GDP estimate for July.

SECTOR IN FOCUS

Insurers offering business interruption insurance could be forced to fork out up to £18bn if a court rules they should pay out for claims related to coronavirus, reports claim.
Small firms argue that insurers have unfairly refused their claims for losses suffered during the pandemic, which they believe their policies should cover.
The case, brought about by City watchdog the Financial Conduct Authority, is expected to conclude later this month.
Investment bank UBS estimates as many as 370,000 firms could receive up to £50,000 if the court rules in their favour, investing website Proactive Investors reports.
If that happens, it would be a blow to insurers that offer these policies, such as London-listed RSA Insurance Group plc (RSA) and Hiscox Ltd (HSX).
However, if they win the case, UBS reportedly predicts the share prices of both firms could rise by 10% or more.

ECONOMIC UPDATE

With coronavirus taking centre stage for much of 2020, it’s easy to forget that the UK and European Union (EU) are still locked in talks over their future trading relationship.
While the UK left the EU on 31 January, it is currently in what is known as a “transition period” where it is still bound by the rules of the bloc. However, this expires on 31 December, meaning a trade deal must be struck before then if firms are to avoid tariffs on cross-border trade.
So what will happen if UK and EU negotiators can’t reach an agreement? Will the UK economy suddenly fall off a cliff? That’s unlikely, according to James Smith, an economist at Dutch banking group ING. For that to happen, he says, consumer spending, which accounts for two-thirds of the British economy, would have to dry up. That is a not very likely, he argues.
However, in a note published on Thursday (3 September), Smith warned that a so-called ‘no deal’ breakaway will result in higher costs for UK businesses and could compound the damage already caused by the pandemic, which would lead to a slower recovery.
A deal between the UK and EU would reduce some, but not all, of this burden, he argues.

FUND WATCH

It may have been 30 years ago since the Nikkei 225 hit a record high of nearly 39,000 but some experts are increasingly warming towards Japanese shares, which have just reached pre-coronavirus levels. If you would like you add some exposure to Japanese companies in your portfolio, you might want to consider Baillie Gifford Japanese B Acc (GB0006011133), which invests in large-cap firms and has returned nearly 95% in five years. It has an ongoing charge of 0.62%.

COMPANY ANNOUNCEMENTS

8 September – Prior to lockdown, JD Sports Fashion plc (JD) was soaring. However, like all retailers, a lack of football is likely to cause a dent in profits. The sportwear giant reports its interim results on Tuesday (8 September).

8 September – Many analysts are downbeat on Royal Mail plc (RMG) because they believe it is too reliant on people sending letters, which is a shrinking market. The group is trying to find a way to boost profits elsewhere, but that may take some time. It publishes a trading update on Tuesday (8 September).