Week in Review: FTSE 100 slides following dire US and German GDP data

FTSE NEWS

Global stocks plunged on Thursday (30 July) following news that the US and German economies shrank 9.5% and 10.1%, respectively, on a quarterly basis between April and June. The news dragged the FTSE 100 2.31% lower to 5,989.99.

• CIPS/Markit kick off the week with their latest manufacturing PMI figures, which measures sector activity, on Monday (3 August).
• On Tuesday (4 August), HM Treasury reveals how many firms have signed up to the various financial support schemes the Government has introduced to help them through coronavirus.
• Car sales are a good indicator of consumer confidence in the economy. Therefore, the Society of Motor Manufacturers & Traders’ new car registration figures on Wednesday (5 August) will be keenly watched.
• The Bank of England will release its biannual Financial Stability Report, looking at the outlook for the financial sector, on Thursday (6 August).
• On Friday (7 August), Halifax updates on the property market when it publishes its well-read house price index.

SECTOR IN FOCUS

The Treasury is reportedly drawing up plans to extend its Help to Buy scheme, which offers financial assistance to those wanting to get onto the property ladder, by three months. The scheme was due to close at the end of this year, but MPs are reportedly planning to extend it to support the housing market through coronavirus. Critics say the scheme has driven up house prices and lined the pockets of housebuilders, which benefit from more people being able to afford to buy a home. The share prices of UK-listed housebuilders such as Barratt Developments plc (BDEV), Taylor Wimpey plc (TW) and Berkeley Group Holdings plc (BKG) spiked on Tuesday (29 July) after the news broke.

ECONOMIC UPDATE

Speculation is building that the Bank of England (BoE) could be forced to introduce negative interest rates for the first time in order to protect the economy from the damaging effects of the coronavirus.
That speculation was fuelled by the BoE governor himself, Andrew Bailey, when he said in May that negative rates were “under active review”.
The issue has been brought back into focus this week following reports that banks were preparing for the introduction of negative rates.
But who really benefits from negative rates? Certainly not the banks, which would see their margins squeezed even further, or savers, who would receive even lower rates on their money than they do now. Borrowers on variable rates would benefit but there is little evidence to suggest their introduction would give added protection to the economy.
Therefore, most people agree that negative rates should probably be viewed as a last resort. Despite that, the speculation will continue to build right up until the BoE announces its next move on rates on Thursday (6 August).

FUND WATCH

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COMPANY ANNOUNCEMENTS

4 August – Fears are growing that BP plc (BP) could follow rival Royal Dutch Shell plc (RDSA) by cutting its dividend to protect its balance sheet. The oil giant is expected to report significantly lower revenues due to coronavirus when it reports its second quarter results on Tuesday (4 August).

5 August – As one of the UK’s most shorted stocks, many professional investors clearly don’t rate Metro Bank plc’s (MTRO) prospects very highly. Wednesday (5 August) offers the troubled bank a chance to calm shareholders’ nerves when it reports its half-year results.