Week in Review: FTSE 100 holds firm despite dismal construction data

FTSE NEWS

The FTSE 100 held strong on Wednesday (6 May) despite dismal data showing construction output suffered its biggest ever slump in April. London’s blue-chip index ended the day up 0.06% at 5,852.82.

• IHS Markit kicks off the week on Monday (11 May) with its latest monthly Business Activity Index, which measures the economic output of nine English regions, Scotland, Wales and Northern Ireland.
• On Tuesday (12 May), the Society of Motor Manufacturers & Traders will update on the latest used car sales data, which is often held up as a proxy for the health of the wider market.
• The Office for National Statistics (ONS) will release the latest output data for the services and construction sectors on Wednesday (13 May).
• On Thursday (14 May), trade body UK Finance will release up-to-date figures on the number of people struggling to repay their mortgages, the level of which is often taken as an indicator of economic health.
• The Insolvency Service publishes its latest company insolvency stats on Friday (15 May).

SECTOR IN FOCUS

It’s a difficult time to be a bank. The Bank of England’s decision to slash rates in March will likely eat into margins while the damaging economic effect of coronavirus could result in a spike in the number of people unable to pay their debts. These concerns were reflected on Wednesday (6 May), when a number of challenger banks updated investors. Virgin Money (VMUK) reported a 57% fall in profit after revealing it had set aside £232 million for bad debts – an increase of £155 million year-on-year. Similarly, OneSavings Bank (OSB) warned more people could struggle with repayments if the lockdown continued much longer. Separately, Metro Bank (MTRO) sought to reassure investors of its resilience during these troubled times despite announcing a 4% year-on-year fall in both lending and deposits.

ECONOMIC UPDATE

It won’t become clear how much damage Covid-19 has caused to the UK’s economy for some time. However, we will get an inkling when the ONS releases the UK GDP data for the first quarter on Wednesday (13 May). As this data captures the early days of the lockdown, it is likely that the data will show a dip in national economic output. Looking further ahead, the ONS, the UK’s chief statistics bureau, has already warned that the country’s economy will suffer a “significant” decline in the first half of the year.   

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COMPANY ANNOUNCEMENTS

13 May – Tour operator TUI Group (TUI), which has been forced to cancel holidays for more than 900,000 people as a result of the coronavirus, received a much-needed boost this week as its Chinese arm started offering travel packages again. While movement remains restricted in key markets such as Europe, it provides some positivity ahead of the group’s interim results on Wednesday (13 May).

14 May – Investors have not heard much from WH Smith (SMWH) since the coronavirus forced it to tap up shareholders for £166 million to shore up its balance sheet last month. The retailer’s full-year results, published on Thursday (14 May), will provide it with a good opportunity to reassure investors of its ability to weather the current crisis.