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Last Week in the City: US infections leap to record high

Garry White, Chief Investment Commentator, provides a round-up of the market moves and the global investing outlook this week ending 26 June.

Garry White, Chief Investment Commentator, provides a round-up of the market moves and the global investing outlook this week ending 26 June.
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Garry White

in Features


Concern spread through markets about the rising level of Covid-19 infections in the US, as states keen on easing restrictions saw a significant spike in cases. However, many US state governors remain reticent to lockdown their economies again. The US central banks also banned share buybacks by US banks and limited dividend distributions, in order to preserve capital that will be needed if the situation deteriorated. Equity markets remain at elevated levels because of central bank support.

The FTSE 100 fell 0.6% over the course of the week by mid-session on Friday, with the FTSE 250 down 2%.

Market commentary continues below…


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Covid-19 is spreading in US states that have started to open their economies. The US set a one-day record for the number of Covid-19 cases and hospitalisations in states that had relaxed restrictions early to get their economies started again. The infection rate ‘R’ is now above one in 29 states compared with just 21 states when lockdown restrictions started to be eased. Reporting record rises in cases this week were Alabama, Arizona, California, Florida, Idaho, Mississippi, Missouri, Nevada, Oklahoma, South Carolina, Texas and Wyoming. The rise in infections prompted the Republican governor of Texas to temporarily halt the state’s reopening on Thursday. Texas, which was at the vanguard of efforts to reopen devastated economies shut down in the face of the pandemic, also saw one of the biggest jumps in new cases, reporting more than 6,000 in a single day on Monday.

The Covid-19 pandemic is subsiding in Europe but getting worse globally with the number of infections expected to reach 10 million next week and the number of deaths 500,000, the head of the World Health Organisation, Tedros Adhanom Ghebreyesus, said.

The government says it will make socialising safely outdoors easier when the hospitality industry reopens. UK pubs and restaurants will more easily be able to turn pavements, terraces and car parks into outdoor areas under proposals to boost the hospitality industry in England and Wales. Outdoor markets and summer fairs will also no longer need planning permission as rules are relaxed. Hospitality businesses have been shut since 23 March to battle the spread of Covid-19 but will reopen from 4 July as social distancing rules are relaxed.

Britain is working on a plan to relax its quarantine for international travellers with some countries where there is a lower risk of contracting Covid-19, environment secretary George Eustice said.

The Asia-Pacific region's economic toll from Covid-19 will be near $3 trillion, according to S&P Global Ratings.


The Federal Reserve banned US banks from share repurchases and will limit dividend payments until at least October to guard against downturn risks. The US central bank warned that America's biggest banks could be hit by losses of up to $700bn in a severe downturn due to the pandemic.

The second reading of US GDP saw a 5% contraction in the first quarter, in line with the first estimate. A much-worse decline is expected in the current three-month economic period because of the Covid-19 pandemic. The International Monetary Fund (IMF) predicted that US GDP will plummet 8.0% this year, worse than its April estimate of a 5.9% fall. The IMF forecast that the global economy will shrink 4.9% this year, significantly worse than the 3.0% drop it had previously estimated. This would be the worst annual contraction since immediately after the Second World War.


The UK government is planning new measures to restrict foreign takeovers on national security grounds. It comes amid growing concern about the risk of China buying high-tech companies, especially in the economic turmoil resulting from the Covid-19 pandemic. Indeed, this week it was revealed that the UK government is prepared to invest as much as £500 million in beleaguered satellite firm OneWeb. Garry White looks at the OneWeb issue and the race for space communications systems as 5G technology is developing here.

Democrat Joe Biden is leading in the polling for the US presidential election. What are his policies and is it too early to write off Donald Trump? We look at the race for the White House and what it means for policy here.

White House trade adviser Peter Navarro on Monday said that the US-China trade pact was "over", stoking volatility in markets. He was forced to walk back on these comments, saying they were taken "wildly out of context", after Donald Trump confirmed in a tweet the deal with China was "fully intact".

The US has threatened new trade tariffs on EU beer, chocolate and olives as part of a long-running row over subsidies to Airbus. The US Trade Representative said it was considering duties on 30 products worth $3.1bn in trade every year. This follows the imposition of 15% to 25% tariffs on $7.5bn worth of other EU goods as part of the dispute.

The European Union has benefited from the retreat of the virus and from the pick-up in business activity after the lockdowns. We look at the EU recovery plans here.


Corporate earnings are going to be subdued for some time but there are some sectors which still offer good growth. The new issues market is highlighting these trends. Garry White takes a look at what’s coming here.


Another of Europe’s great technology hopes bit the dust. Scandal-hit German payments firm Wirecard filed for insolvency, causing its shares to dive almost 80%. It comes after the German firm last week disclosed a €1.9bn hole in its accounts. Former boss Markus Braun has since been arrested and accused of inflating Wirecard's finances to make them appear healthier to investors and customers. Brussels may probe the German regulator.

The UK Treasury is offering to reduce the scope of its digital services tax (DST) it hopes to levy on tech behemoths such as Amazon and Facebook, if the US promises to come back to the negotiating table on a global proposal. Alongside the finance ministers of France, Italy and Spain, the UK said in a letter to US Treasury secretary Steven Mnuchin it would “considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year”, Bloomberg reported. Mr Mnuchin sent a letter to ministers last week saying the US would be pulling out of discussions with the OECD on a global DST unless the four countries halted their independent plans.

The US Defense Department has determined that 20 top Chinese companies, including Huawei, are either owned by or backed by the Chinese military. The list, seen by US media, features video surveillance firm Hikvision, China Telecoms, China Mobile and AVIC. This lays the groundwork for new US financial sanctions against the companies. Garry White looks at how US authorities are trying to starve Chinese companies of investment here.

US telecoms operator Verizon become the latest major company to pull advertising from Facebook platforms. The company joins Unilever’s Ben & Jerry's and a growing list of companies boycotting the social media giant over its handling of controversial posts. Verizon is believed to be the biggest advertiser so far to back the ‘Stop Hate for Profit’ campaign.


Oil prices inched up on Friday, boosted by signs of a recovery in demand for fuel, but fell over the week because of the rising Covid-19 cases in the United States and China. Brent crude futures fell 1.7% over the week to trade at about $41.50 a barrel.


British car production fell by 95% in May, with just 5,314 vehicles being built at UK factories, according to the Society of Motor Manufacturers and Traders. This was a slight improvement on April, when only 197 cars were built, but with factories still closed or running at reduced capacity, it still marked the worst May since 1946.

Aston Martin Lagonda shares fell after the luxury car manufacturer announced a new equity raise, planned for the end of June, would be equivalent to around 20% of its existing issued share capital.

The push by governments for green vehicles is not matched by consumer enthusiasm, but changes in the auto industry are significant and revolutionary. We examine the challenges faced by the global car industry here.


Retail property giant Intu said talks with lenders had failed to reach an agreement to save it from falling into administration. Intu has until midnight on 26 June to reach a deal, but in a statement on Friday morning said “insufficient alignment and agreement” had been achieved. It is now likely to fall into administration. Figures released on Friday suggest UK retailers have only paid 15% of rent due in the last quarter.

Tesco’s sales rose 8.2 per cent to £12.2bnin the first quarter to 30 May. Across the group, sales rose 7.9 per cent to £13.4bn a period almost entirely covered by lockdown. Chief executive Dave Lewis said the retailer had managed to double its online capacity, from 600,000 slots a week to 1.3 million slots a week. This is significantly more new slots than Ocado managed to add, raising some questions about whether the “store pick” model employed by other retailers was a better route than Ocado’s centralised warehouse model.  

Sports Direct owner Mike Ashley is reportedly at the top of an HMRC “hit list” to investigate complaints made around alleged breaches of the government’s furlough scheme. An HMRC source reportedly said several household names, including Mr Ashley, were being investigated, with Sir Philip Green’s Arcadia also receiving criticism for taking furlough funds. Some of Mr Ashley’s staff allege that they were asked to work while on furlough which, if proven, would breach the government’s Covid-19 job retention scheme rules.


Low-cost airline easyJet said it strengthened its finances by $255m through the sale and leaseback of six A320neo aircraft with leasing firm SMBC Aviation Capital. The group also raised £419m this week through an equity issue.

US private equity group Bain Capital said it has agreed with the administrator of Virgin Australia to buy the country’s second-largest airline for an undisclosed sum.

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