Jul 20 2020

Last week saw further Government announcements and guidance changes aimed at getting more of us back to work, and specifically to our place of work.

From 1st August, employers will have more discretion over whether or not they reopen their premises. Public transport guidance will be updated to reflect this as the usage of trains and buses remains much lower than normal; the chart below shows the movements of UK people compared to levels in January:

Amidst calls for caution from the scientific community and leaders of the other home nations, the Prime Minister has said that he hopes for a ‘more significant return to normality by November as he set out his roadmap for ending lockdown. Subject to successful pilot events, indoor theatre performances and concerts can take place from August. Business events can resume from October and in the same month, sports fans may be able to return to stadia.

On Sunday 19th July, 726 new cases of coronavirus were reported, along with 27 fatalities. The 7-day trend of new cases has risen slightly from last week, but with testing levels still rising rapidly, this isn’t a surprise; on Saturday 18th July, nearly 180,000 tests were administered.

Normalisation continues in the UK but economic data remains poor. During the week, May’s month-on-month GDP figures were announced as just +1.8% after April’s record fall. This compares to the consensus estimate of +5.5%. The country likely made a more robust recovery in June, and data collection has undoubtedly been more difficult than usual, but this does dampen hopes of a rapid recovery.

More positively, retail spending in shops roared back to life in June as evidence of pent-up demand appeared. Spending last month was nearly 3.4% higher than a year earlier according to the British Retail Consortium; a sharp turnaround from the fall of nearly 20% during April. The reopening of pubs and restaurants was also positive as the chart below shows, but the sector still has a long way to go before it reaches a full recovery:

Globally, the Chinese economy returned to growth in the second quarter of 2020, with GDP rising by 3.2% in the three months to June compared to the same period a year ago. The recovery has been driven by credit stimulus seen in strong infrastructure and property investment data, while the recovery in retail sales and private investment has continued to lag.

In markets, risky assets generally rose in Pound terms as fundamental economic data was positive, as was newly released information about two coronavirus vaccine candidates – one from Oxford University in the UK. The Pound fell in value against all major currencies due to the disappointing GDP data and slightly higher than expected inflation, meaning overseas equity returns were boosted.

European equities rose by nearly 3.5%, boosted as EU leaders met to discuss the size, distribution criteria and structure of the much talked about €750bn recovery fund. Early reports are cautiously positive, with the ‘frugal four’ nations agreeing to slightly lower levels of grants as a proportion of the overall fund than originally hoped.

The FTSE 100 rose by 3.2% - helped by the weaker Pound – and Japanese equities rose by 2.9%. Domestic UK equities continue to struggle in relative terms; the FTSE 250 rose by 0.99% this week, below levels of other developed market indices. Finally, Emerging Market equities fell this week by 0.2%, led lower by Asian shares after a very strong rally in recent weeks.

Similarly to last week, the precious metals rally continues, with the price of silver moving up by 4.8% and that of gold by 1.2% in Pound terms. In the short term, the sharp upwards moves in both metals has become a little stretched, but the fundamentals of the asset class remain attractive in the medium term.

Financial markets remain ‘risk on’ for the time being, even as infection numbers in the US remain high. As yet, there hasn’t been a meaningful spike in deaths – we very much hope this remains the case. Geopolitical tensions remain elevated, too, with various countries’ relations with China continuing to fray, but for now, the virus recovery narrative should continue to take centre stage.

We will begin our strategic, phased return to office from August, while our plans do not yet include face to face client meetings, we remain agile and our advisers are available to discuss your financial needs over the phone or via video conferencing.

Share this article


For further information, please contact:
Andrea Barker
/ Tel. +44 (0) 191 519 6243