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Last Week in the City: UK unemployment could double

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (4 to 7 May 2020).

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped equity markets this week (4 to 7 May 2020).
Garry white employee

by
Garry White

in Features

07.05.2020

After the steep falls in equities seen in late February and March, the financial market environment has improved somewhat and several factors have combined to boost investor sentiment.

The FTSE 100 was up 3.9% over the course of the week by mid-session on Thursday and the FTSE 250 was trading little changed.

Market update

The spread of Covid-19 has not been as bad as was feared in the middle of March and this has brought equity markets off lows. This has been supported by an increasing focus on reopening the economy, with parts of the US likely to follow recent easing measures in Europe. However, experiences in Singapore and Northern Japan suggest reducing lockdown measures isn’t a simple process.

Central bank liquidity injections have boosted portfolio flows into riskier assets such as equities. The US Federal Reserve’s balance sheet has grown by $2.3 trillion since March. This has helped to make a marked improvement in the functioning of the corporate bond market, supported by central banks.

As markets continued to push higher in April some investors who had become cautious in March and were keen to recoup losses began to chase the market higher. 

The rebound has also been driven by “short-covering”. This is the process where some investors buy shares to end a trade which is designed to gain from a falling market.

Charles Stanley Radio

To support our remote living and working lives, we have launched Charles Stanley Radio to bring you the latest news from Charles Stanley.

Listen to expert commentary from our research team and analysts, informal Q&As with our colleagues to hear about their experiences adapting to this new way of working and specialist content from our partners. The two latest episodes are:

Let's talk about markets: Jon Cunliffe and Scott Gardner discuss the market’s continuing uncertainty and the opportunities this presents for long term and short-term investments here.

Spotlight Session: Anxiety in times of crisis – the psychological and emotional impact of coronavirus (part one) here.

The radio page with all previous recording can be found here.

Financial planning

Discussing how your assets will be dealt with when you pass away can be a difficult conversation to have with your family, as it is something you don’t want to think about. However, it can be one of the most important conversations you ever have as a family.  Putting your affairs in order not only gives you significant peace of mind but can also help your family sort out your affairs more quickly and ease the burden. Find out more here.

Economics

The Bank of England has warned that the UK economy is heading towards its deepest recession on record. The impact of coronavirus meant the economy would shrink 14% this year, based on the lockdown being relaxed in June. The Bank’s policy-making committee voted unanimously to keep interest rates at a record low of 0.1%. However, the Monetary Policy Committee was split on whether to inject more stimulus into the economy. Two of its nine members voted to increase the latest round of quantitative easing by £100bn to £300bn. No new measures were introduced.

A ruling by the German Constitutional Court questions the heart of European Central Bank policy during the Covid-19 crisis. John Redwood looks at the latest EU row here.

Recovery is much easier if the lockdown is short-lived and the debt burden limited. Companies with too much debt and too little income will eventually go bust. John Redwood looks at affordable debt burdens here.

Unemployment

The Bank of England thinks that UK unemployment will more than double to around 9%.

In America, private payrolls fell by a record 20.2 million in April, this is the most jobs the country has ever lost in a month.

Technology

A slow easing of lockdown restrictions means the jobs market will take time to recover, but investment in technology could provide a productivity boost. John Redwood looks at changing work patterns here.

A digital iron-curtain separating East and West is now more likely than ever and the clash of civilisations accelerates, Garry White argues. Looking at China’s growing advantage in 5G technology, he thinks Washington needs to learn lessons from Beijing. Read more here.

Energy

Oil prices continued to bounce as traders eyed output cuts from the world’s largest producers and hoped the reopening of parts of the US economy would boost demand. Brent crude prices rose more than 16% over the week by mid-session on Friday to trade at just under $31.55 a barrel. 

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

 

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