Jul 06 2020

As in recent weeks, we are delighted to share that the UK seven-day moving average for coronavirus fatalities currently sits at 96, down from a peak of 943 in the middle of April.

This weekend, pubs and restaurants reopened to much fanfare as 4th July was dubbed ‘Super Saturday’. Patrons were urged to go out and spend. Scottish and Welsh revellers were cruelly denied however and must wait at least another week, though some managed to find a way – as one pub in Berwick-upon-Tweed claimed, 70% of its bookings were from Scotland, with patrons taking advantage of its position just across the border.

It is hoped that reopening the hospitality industry will spur a further shift upwards in economic normalisation, though we must wait for the data to bear that out as lockdown is slowly loosened. The Chancellor will make an emergency statement this week, expected to focus on measures to create jobs, and in particular, opportunities for under-25s whose prospects have been particularly dented by the lockdown.

As mentioned in previous notes, various measures have been mooted such as temporary VAT cuts, and a rise in the stamp duty threshold, but in a new eye-catching move, the Chancellor is reportedly considering plans to hand out ‘consumption vouchers’. These would take the form of £500 vouchers for adults and £250 for children, to be spent in certain sectors such as ‘face-to-face’ retail, rather than online, in an immediate one-off boost to spending.

Such ideas come as calls grow to extend the Government’s furlough scheme beyond October for the hardest-hit sectors, many companies within which simply will not survive without additional support.

Elsewhere during the week, rising rates of infection in the US continued to be juxtaposed against falling fatality numbers. While new cases rise steeply in the likes of Arizona, California, Florida and Texas, as the chart below shows, fatalities are trending resolutely downward, and importantly there has been no sign of a resurgence in New York:

For now, hospitalisation levels remain controlled and below that seen in New York at the height of the outbreak in April, however, worries remain over the possible lag effect that may feed through into higher fatality levels.

Finally, at the end of the week, the US jobs report for June was stronger than market expectations with data indicating that 4.8m jobs were added during the month. The unemployment rate declined to 11.1% from 13.3%. These numbers are impressive, but the US labour market is still in a parlous state, with those people losing their jobs on a permanent basis continuing to rise – up by 1.6m in four months. The way this datapoint is collected is qualitative but points to a more nuanced picture:

In a generally positive week, equity markets rose with the exception of Japan whose market fell by 2.5% in Pound terms. US equity markets were closed on Friday due to 4th July celebrations and so have incomplete weekly data, but to Thursday the S&P 500 had risen by 2.8%. Emerging Market and Asian equity performed best over the full week, rising by 2.4% and 2.5% respectively, enjoying an additional boost from currency gains, with the UK and Europe further back. The FTSE 250 rose by 1.1% and the FTSE 100 eked out a 0.05% return, hindered by a stronger Pound.

Fixed income sectors were broadly positive, though conventional Gilts fell in value by 0.2%. Riskier parts of fixed income markets continue to perform well, retracing their falls from March and April. Precious metals prices rose slightly during the week but again did not trade on Friday due to the US holiday.

We await the Chancellor’s statement on Wednesday with interest to see where support measures are targeted. Whilst the economy is undoubtedly recovering, it is doing so only very slowly, and more support will be needed to see us through the crisis safely.

The developments in the US will be particularly important, especially with regards the divergence between new cases and fatalities. Economic data is also released this week on business sentiment and US jobs that will no doubt impact the direction of travel in the short-term.

As a reminder, all Fairstone offices remain closed for now, however, if there is anything you would like to discuss, either relating to the above or to your general financial planning needs, I am always available to chat either on the phone or via video conferencing. Please do not hesitate to get in touch.

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