Jul 27 2020

Face coverings must now be worn in shops in England, with the rule applying to enclosed public spaces such as supermarkets, takeaways and transport hubs. Police can issue £100 fines to people who do not comply, but many forces and business have already said that they will not try to enforce the new measures.

Both Sainsbury’s and Asda have publicly stated that it isn’t their job to police shoppers, while the Metropolitan Police Commissioner Cressida Dick was reported as saying it wouldn’t be a priority. In Wales, masks will be mandatory on public transport, but will not be required for shopping or other activities. The Welsh Government has declared that it is a matter for the individual citizen to make such a decision themselves.

As has been mentioned in previous notes, the UK economy is on a longer road to recovery than the US and Europe, on account of our slower lockdown imposition and also our slower rate of normalisation. A big chunk of the UK’s economic output is exposed to the negative implications of social distancing, with the hit to the hospitality and entertainment sectors highlighted in the first chart below. It looks at visits to retail and recreation locations across various regions relative to January, and shows the UK lagging. This has impacted on the recovery in aggregate, as can be seen from the second chart which amalgamates various measures of activity to form a composite recovery tracker:

Nevertheless, normalisation does continue, and on Sunday 26th July, 745 new cases of coronavirus were reported, along with 14 fatalities. The seven-day moving average of fatalities has fallen to 64.

Also during the week the Chancellor announced that nearly 900,000 public sector workers, including doctors and teachers, are to get an above-inflation pay-rise. The Treasury said that the money for the pay increases of up to 3.1% would come from existing departmental budgets.

Elsewhere, Spain is scrambling to stay ahead of new coronavirus outbreaks that have prompted the UK to summarily impose a quarantine on travellers returning from the country, causing chaos amongst holiday-goers there, which includes Transport Secretary Grant Shapps. Most of the new cases have been uncovered in Catalonia, where authorities have been expanding restrictions; ordering nightclubs to shut for two weeks and placing midnight curfews on bars.

France has also seen a steady increase in new daily cases through July, with the seven-day moving average at 837, up from a low of 272. But, as here in the UK, this rise  hasn’t come in conjunction with an increase in fatalities, and the French Government among many others has made it clear that it cannot afford to reimpose the severe lockdowns seen earlier in the year. The French Prime Minister Jean Castex was reported as saying “we won’t survive, economically and socially.”

Outbreaks continue to emerge or re-emerge across the world, usually after lockdowns have been released, but equally have often been linked to younger demographics less affected by the virus. Hopefully, given our much improved understanding of the virus and who it most acutely affects, we will be able to better and more pragmatically manage its inexorable spread moving forwards.

In markets the Pound moved higher against other major currencies during the week, rising by 1.78%, 0.55% and 0.07% against the US Dollar, Yen and Euro respectively. Equities generally fell as investors remained concerned around the state of the US economic recovery in light of increased virus infections and fatalities. Billions of dollars of federal aid is set to expire at the end of July, with an updated proposal still being finalised.

The FTSE 100 index fell by 2.6%, being negatively impacted by the stronger Pound, with the S&P 500 also lagging with a 2.2% loss due to the above, as well as increased tensions with China. Emerging Market equities led by Eastern Europe and Latin America performed relatively well, with the UK’s FTSE 250 also outperforming, though still registering a negative 0.5% return.

Safe havens were sought after this week, with UK government bonds generally rising in value, but the standout performer at the asset class level yet again was precious metals. The price of silver rose by 13.3% in Pound terms, and that of gold by nearly 3%, with associated mining equities also rising strongly. Gold is now approaching all-time highs when priced in US Dollars – a level reached in August 2011. As before, we feel that a near-term correction or ‘pause’ would offer some respite for investors given how sharp the upward moves have been, but as quantitative easing and fiscal stimulus programmes are set to indefinitely continue, the asset class should remain an important diversifier.

We appreciate that many clients will naturally feel concerned during these challenging times and at Fairstone, we believe that communication is key. As a reminder, we are available to talk about any concerns or questions you may have as well as to review your financial position. While we cannot meet face-to-face at the moment, we can chat on the phone, video call or via video conferencing.

Can I also encourage you to follow our social media platforms to keep up to date with our latest updates and news? You will find Fairstone Group on Facebook, LinkedIn and Twitter.

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PRESS INFORMATION

For further information, please contact:
Andrea Barker
andrea.barker@fairstone.co.uk
/ Tel. +44 (0) 191 519 6243