FTSE 100 & oil both dip amid stimulus concerns

Safiya Bashir
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FTSE 100 & oil both dip amid stimulus concerns

The FTSE 100 was 0.15% in this morning’s trading.

Travel stocks and shares in hospitality, however, edged up amid the hopes that the new Covid strain is slowing down.

The top riser on the FTSE 100 was Airline group IAG, which was up 3%. Rolls Royce was 1.75% higher and hotel group Whitbread was up 2%.

Shares in Europe have opened higher with Germany’s DAX and France’s CAC both up 0.5%.

David Madden of CMC Markets said: “The French government started to soften its stance with respect to the two-day passenger and goods ban and that set the tone in European markets yesterday.

“The fears of the UK being cut off from the rest of Europe faded [yesterday] and traders bought back into equity markets as they took the view that goods would be freely moving across the English Channel again in the near-term.”

The price of oil also dipped on Wednesday on the latest Covid developments and concerns over Donald Trump’s threat not to sign the US stimulus bill.

Brent crude is down 1% at $49.55 and US crude fell to $46.50.

Stephen Innes, chief global market strategist at AXI was more hopeful on Trump and the stimulus bill, saying: “No one will walk away from a stimulus deal; it is all about what contours get changed. And frankly, I do not think Main Street will mind getting a $2000 surprise stocking stuffer, and neither will the markets.”

Raffi Boyadjian of XM commented on Trump, the FTSE, and currencies: “While it seems more likely than not that Trump will eventually sign the stimulus bill, it may be wrong to underestimate his determination to frustrate life for the incoming Biden administration as much as possible.

“But for now, optimism is the order of the day as investors were encouraged from some easing of the UK travel ban in Europe. France has decided to reopen its borders to UK lorry drivers coming through the Channel but will only allow those that test negative for the coronavirus.

“Currencies were similarly buoyed by the receding fears that the new virus strain would significantly hamper the global recovery, with progress on reopening the French-UK border underlining the positive tone.”

The FTSE 100 is currently trading -0.085% at 6,447.70 (1030GMT).

Will house prices continue to rise in 2021?

Safiya Bashir
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Will house prices continue to rise in 2021?

According to the property website, Zoopla, house prices in the UK are expected to finish 2020 on a high.

Despite the recession, lockdown and economic downturn, the housing market has seen a boom and this year will see £62bn more in agreed sales than last year.

Zoopla said that house prices rose by 3.9% in November and the cost of an average home in the UK reached £223,000.

House prices are expected to continue to rise into 2021, according to real estate firm Rightmove. Asking prices rose almost 7% this year and are expected to rise a further 4% over the next 12 months.

“It will be a busy start to 2021. The New Year is typically a time for resolutions for the year ahead, and many will see it as an opportunity to draw a line under 2020, which may well include a fresh start in a new home for those who have not already acted.  Many have already done so since the English market re-opened in May, and many more are continuing to do so despite the seasonally quieter run-up to the Christmas period and the declining chance of completing a purchase before the stamp duty deadline,” said Rightmove.

The stamp duty is set to end in March and house prices are expected to see a dip. The Office for Budget Responsibility has said the current boom will come to a close as the UK will see a spike in unemployment.

“House prices fell briefly as the pandemic struck, but recent indicators suggest they have subsequently recovered quite strongly,” the Office for Budget Responsibility said.

“This follows the easing of public health restrictions and the stamp duty holiday for residential property transactions that took effect on 8 July 2020. House prices are expected to fall back in 2021, driven by end of the stamp duty holiday and the hit to household incomes from the labour market adjustment that we assume will follow the end of the Coronavirus Job Retention Scheme.

“Despite a steady recovery from 2022 onwards, the level of house prices remains around 17 per cent lower at the forecast horizon compared to our March forecast.”

Job support must continue until pandemic ends, says BoE’s Haldane

Safiya Bashir
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Job support must continue until pandemic ends, says BoE’s Haldane

Bank of England interest rate-setter Andy Haldane has said that the UK government support should continue until the Coronavirus pandemic ends.

In an interview with The Guardian, Haldane said that unemployment was “public enemy number one” and that the government should continue job support to prevent the unemployment rate creeping higher.

Since the pandemic, unemployment levels have risen from below 4% to over 6%.

“For me, many decades on, it remains public enemy number one, because of the devastating impact it has on people’s lives and their families’ lives,” he said.

“Policy has been tremendously important. A huge amount of insurance has been provided by the government and the Bank of England – supporting people’s jobs, supporting incomes, supporting businesses and supporting borrowing costs. Without that insurance the outcome for jobs, incomes and the economy would have been massively, massively worse.”

“Policy insurance has been crucial and will remain crucial during that bridging period as we hopefully squeeze the risk of the virus out of the system and reduce the risk of losing jobs and businesses. We need to provide that bridge, that insurance policy, for as long as the risk of either or both those things remains high.”

He added that the Bank of England would continue to provide support for as long as was needed.

Haldane said that there was still a long way to go beyond the Covid crisis and providing support is necessary for the UK population. He said: “We are still in a hole and the hole is still deep. We need to keep climbing out that hole through policy measures and the vaccine. But once we have climbed out – and we will – we mustn’t forget about long-term structural issues: what will give us good work at good pay.”

Rishi Sunak said in November that he would be extending the furlough scheme until the end of April.

The chancellor also announced that government-backed loans that are designed to support firms throughout the pandemic would continue to give “certainty well ahead of the 45 day redundancy notice period, with budget setting out the next phase of support more than 45 days before the new end date of the scheme”.

“Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country,” said Sunak.

“We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support.”

UK borrowing hits record high

Safiya Bashir
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UK borrowing hits record high

Public sector net borrowing in November hit the third-highest since record began in 1993.

Borrowing last month hit £31.6bn. Between April and November this year, public borrowing has reached a total of £240.9bn, £188.6bn more than in the same period a year earlier.

Last month, Rishi Sunak said that the current rate of borrowing was “obviously not sustainable”.

Sunak said: “In the midst of a crisis it’s absolutely right that we take the action that we have done to protect people’s jobs to protect their health, as we get through this. But what the numbers yesterday showed is that the projections for borrowing debt are ones which are obviously not sustainable. We can’t carry on at the level that we’re doing this year.”

It has also been announced that the UK economic recovery was slightly ahead of expectations in the three months ended September.

The Office for National Statistics said national income, or GDP, increased by a record 16% during this period, up from the 15.5% estimate.

Ruth Gregory, a UK economist at Capital Economics, said: “At least the drop in the saving rate left it far above its long-run average of 8.0%. That implies there is plenty of scope for household spending, and GDP, to rebound strongly once the restrictions are lifted.”

The UK’s national debt currently stands at £2.1trn.

Sunak, commented on the rate of borrowing: “As part of our plan for jobs we’ve invested £280bn to protect millions of jobs and businesses across the UK.

“This is the right thing to do to protect lives and livelihoods during this acute phase of the crisis. When our economy recovers, it’s right that we take the necessary steps to put the public finances on a more sustainable footing so we are able to respond to future crises in the way we have done this year.”

Toyota closes factories amid border chaos

Safiya Bashir
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Toyota closes factories amid border chaos

Toyota has said that it will be stopping production at its British and French plants earlier than expected due to the Covid-19 border disruption.

As France banned all freight or cargo from Britain for 48 hours, the group faced shortages of parts. As a result, the engine plant in Deeside in north Wales, the factory in Burnaston in Derbyshire, and the French site will all close earlier than expected before Christmas.

Toyota said that the closures would “help ensure the safety and security of our employees and all our stakeholders, particularly our logistics partners and in consideration of society’s wider needs”.

Adding that the decision had been made “in light of the traffic bans that a growing number of countries have issued for travel from the UK and due to the uncertain nature of how long the borders will be closed for logistics activities”.

Boris Johnson spoke with French President  Emmanuel Macron on Monday evening to see if the travel ban could be lifted.

Johnson said at a Downing Street press conference: “I have just spoken to President Macron – we had a very good call – we both understand each other’s positions and want to resolve these problems as fast as possible.”

“I want to stress that we in the UK fully understand the anxieties of our friends about Covid, their anxieties about the new variant, but it is also true that we believe the risks of transmission by a solitary driver sitting alone in the cab are really very low.

“And so we hope to make progress as fast as we possibly can. I want to repeat that these delays only apply to a very small percentage of food entering the UK, and, as British supermarkets have said, their supply chains are strong and robust, so everyone can continue to shop normally.”

France is just one of over 40 countries that has suspended flights and trains from the UK.

DFS shares rally on strong sales

Safiya Bashir
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0
DFS shares rally on strong sales

DFS shares surged on Tuesday’s opening after the group revealed a 19% increase in gross sales in the 24 weeks ending 15 December 2019.

Despite the Covid-disruptions, the furniture retailer saw impressive growth in the online channel, where sales surged 76% compared to the same period a year ago.

The group said in a statement that as a retailer, they have benefitted from people spending more money at home over the course of the pandemic.

Tim Stacey, the DFS chief executive, said: “I want to thank every colleague in our Group for their resilience, spirit and determination to overcome the many and varied operational challenges that we have faced since reopening our business after the first lockdown.

“We are working all hours focusing on what we can control to look after our people and our customers. I want to thank our customers for their patience given the ongoing disruption to our deliveries due to port congestion and raw material shortages, as well as apologise to those that have experienced delays.

“While the current environment is clearly unpredictable, our business model is resilient and we are well set for medium-term growth,” he added.

Looking forward, the group expects full-year profit to within the upper half of the current market consensus range.

“Although our financial performance will never be immune to the short term market environment, we believe our cash generation across the cycle and our overall growth prospects will drive attractive long-term financial returns for our shareholders,” said the group in a statement.

Over 25% of the retailer’s showrooms are currently closed due to Coronavirus measures and the group has also been coping with issues surrounding suppliers and lack of raw materials.

DFS shares are trading +10.00% at 231.00 (0900GMT). In the year-to-date, shares in DFS have fallen from highs of 302.00.

Oil dives as new strain triggers travel restrictions

Bronte Carvalho
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0
Oil dives as new strain triggers travel restrictions

The price of crude oil plummeted on Monday as concerns mount over the rapid spread of a new strain of Covid-19, causing a mass travel ban between the UK and more than 30 other countries around the world as leaders fight to keep the variant from spreading.

Known as VUI-202012/01, the new strain was first identified in the South-East of England in September, and has been attributed to the steep rise in cases seen in London and the surrounding counties in recent weeks.

Despite the travel restrictions, it has already been confirmed in a number of countries including Denmark, Gibraltar, the Netherlands and Australia, while authorities have reported suspected cases in Italy, France and South Africa.

With widespread travel bans coming into force this week, demand for oil has already suffered a sharp decline, with Brent Crude down 3.90% just days after rising 1.5% to reach its highest since March last Friday, while WTI Crude similarly slid 3.97% after climbing 1.5% on Friday to its highest point since February.

“The new strain of the COVID-19 virus is worrying for the market, as it is believed to be more infectious, and could lead to a host of new travel restrictions, sapping oil demand,” Pan Jingyi, market analyst at IG, told S&P Global Platts today.

Warren Patterson, head of commodities strategy at ING, added: “Over the past few weeks we have seen quite a bit of speculative money moving into the market, and the fear of more lockdowns and travel restrictions that this new virus strain has raised is causing some of that speculative money to close their positions”.

Alternative Investment trends to watch in 2021

Jamie Gordon
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Alternative Investment trends to watch in 2021

2020 has proven to be a year of challenges, loss and opportunity for investors and wider society alike. One of the discussions being had during the pandemic has been the need to diversify holdings, and spread both risk and rewards across a wider range of asset classes. The discussion about alternative investment should not be confined to 2020, though, with prevailing political and public health risk factors facilitating a continuation of uncertainty into the medium-term.

Speaking to the UK Investor Magazine, CEO and Co-Founder of loan investment platform, Mintos, Martins Sulte, gave us his five top trends to look out for in alternative investment, through 2021.

Fast-moving fintech

First, Sulte pointed to the sharp uptake in fintech solutions as a means of money management, with consumers looking to distanced money management platforms amid lockdowns and both tighter restrictions and fewer incentives from orthodox banking groups. During the first half of 2020, 12 out of 13 fintech sectors reported year-on-year growth, with this trend new likely to extend into the New Year.

“Fintech is already booming, but the market has yet to reach its peak and will continue growing throughout the next year,” said Mr Sulte. “Our own growth plans involve Mintos becoming a regulated marketplace, which will open even more opportunities for growth.”

The adoption and investment into startups developing technology and solutions for financial institutions, SMEs or personal finance is steadily increasing, despite the dip in investment numbers this year, 2020 investment in fintech numbers were higher than in 2018 in most of the EU.

Alternative investment means diversification

As stated, the pandemic has caused investors to diversify in two broadly classifiable ways. On the one hand, existing and deeply-committed veterans have branched into new fields to spread their risk going forwards, and hedge against potential losses incurred during March-mageddon. On the other, we have the relative newbies, who invest in fledgling sectors looking to grow during the recovery – and those attempting to fill a gap in the market.

According to Sulte, these trends are here to stay, with the pandemic heralding a behavioural shift among investment culture. As opposed to sticking all your money is a supposedly unsinkable ship, many are seeing the attraction of spreading their assets out, with the knowledge that while some of the bigger players might lack manoeuvrability, newer entrants might have the flexibility to weather a storm.

“If anything, 2020 should have taught investors that well-established principles like investing for the long-term with a low-cost diversified portfolio and only checking your investment balance occasionally might not be the safest bet afterall,” said Mr Sulte. “I think that in 2021 investors will pay extra attention to see how they can future-proof their portfolios by diversifying their investments across various assets. Alternative investment options can be diversified further with many options and risk variability to choose from.”

New entrants require new regulation

Another important feature of alternative investment growth has been the rapid entry of newcomers, providing innovative tech and services. While some companies have merely complimented existing sectors, others are creating new ways of new business, with fintechs – for instance – driving a reconceptualization of the way we manage our money.

While many of these burgeoning household names are set for success, the regulatory response has (predicatbly) been hesitant about how to implement a framework of rules on this new way of doing business. This anticipated regulation might make it more difficult for new entrants to gain a foothold, but will ultimately improve the standing and public trust in existing fintech offerings.

“Going forward, the competition will become stronger because a lot of fintechs are looking at regulation as a way to reassure their clients and bring more clarity, transparency and safety,” said Mr Sulte. “As for new and small platforms, it will be more challenging for them to stay in the game if they refuse to become regulated.”

Slow value recovery

While some alternative asset classes like spirits, wines, precious metals and Bitcoin have enjoyed an upsurge in support during 2020, other alternative investments have taken a hit to their valuations during the pandemic. Sulte predicts that while initial signs of recovery in COVID-stricken classes has begun, but uncertainty about the new virus strain and Brexit might see some alternative under-performers be stuck with a slow recovery, as investors exercise caution.

“With the vaccine arriving in the majority of countries next year, optimism is felt across the investment markets,” said Mr Sulte. “Many investors will test what works for them on a smaller scale and look at sectors that are slated to rebound the fastest. At Mintos, we’ve seen very stable albeit slower investing this year, which can be interpreted as more cautious investing. This is likely to continue into 2021 with less focus on yield hunting, but more care in portfolio diversification, which will make the value regrow slower.”

Financial literacy takes centre stage

While after the 2008 financial crash, consumers were content with blaming speculative bankers and lenders for their woes, the 2020 downturn has not only affected us all, but created more interest – and less distrust – of financial services. Counting pennies has become a popular trope of a year marred by unemployment, furlough and pay-cuts, and with this, people have been looking for ways to make their disposable income and savings go further.

While on the one hand, new money management services and online investment apps have seen their popularity soar, consumers taking a more hands-on approach to money management may see increased support for alternative investments, with many wanting a stake in a possible product-of-the-future.

“It is the users’ pains, needs, and demands that drive the development of the financial industry,” said Mr Sulte. “Financial literacy can be a life-changer, impacting everything from getting a college education to starting a business. At the macro level, it can help bridge the wealth gap and support economic mobility. Since an increasing portion of the market understands the significance of financial literacy, we will see more efforts to support the new coming investors in 2021.”

Christmas shopping hit as Brits opt to save

Bronte Carvalho
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Christmas shopping hit as Brits opt to save

New research from the Nottingham Building Society has revealed the impact of the coronavirus pandemic on how much Brits plan to spend on their Christmas shopping.

Even before the recently announced Tier 4 restrictions on London and the South-East, 19% of people said that they expect to spend ‘significantly’ less this Christmas than they did last year, with a further 28% anticipating they will spend ‘slightly’ less. Just 4% of people expect to spend more, and 43% anticipate their expenditure will be the same.

Those planning to spend less – estimated from the UK’s entire population of 52 million adults – will save a total of over £4 billion when compared to last Christmas.

In terms of how much people expect to spend in shops this Christmas compared to last year, 49% say they will cut back, with just 5% expecting to spend more than they usually would. About 45% anticipate their expenditure in shops to fall by over 10%, and 14% say it will be more than 50% less.

Despite the blow to high street stores – who usually rely heavily on Christmas trade to see them through the quiet months at the start of the year – 54% of people said that they expect to spend more online this Christmas than last year, with 43% anticipating a rise of over 10%, and 14% expecting to spend over 50% more.

Of those people who expect to spend less overall this Christmas, 48% say it’s because it doesn’t feel ‘appropriate’ to spend too much this year given the ongoing crisis. Some 34% say it will be because of restrictions around how many people are permitted to visit one household, and 18% say it’s a result of having less money due to providing more financial support to loved ones.

Some 12% say it’s because they have been furloughed and have less money, and a further 7% say it’s due to being made redundant and are unable to afford to spend as much as last year.

Overall, 32% of people anticipate they will spend less on food this Christmas when compared to last year, whilst 53% think their expenditure will be the same, and 7% expect to spend more (the remainder didn’t know).

As a result of the current crisis, 62% of people say this Christmas they will ‘focus more on the people they love’ as opposed to buying presents than in previous years, and six out of ten (60%) believe there will be a ‘bigger focus on the true meaning of the festive season’.

Ben Osgood, Senior Manager at The Nottingham, commented on the report’s findings: “People’s finances have been impacted by the Coronavirus crisis, and this coupled with the restrictions on meeting people and going out, means many will spend less on celebrating this year’s festive season than they did last year.

“However, our research shows that this year, people will place a much bigger focus on the true meaning of Christmas in terms of focusing on the people they care about as opposed to how much they spend on presents”.

Airline equities tumble amid travel ban

Bronte Carvalho
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Airline equities tumble amid travel ban

Shares across the UK’s largest airlines plummeted on Monday morning following the announcement of widespread travel bans to prevent the spread of the new Covid-19 variant.

Easyjet (LON:EZJ) saw its shares freefall a hefty 9.34%, while British Airways’ parent firm IAG (LON:IAG) reported an 8.89% drop, and Ryanair (LON:RYA) a 5.11% dive just after midday.

Jet2 (LON:JET2) shares were also down 4.90%, with Wizz Air (LON:WIZZ) shares sinking 4.01%.

While the situation is still rapidly developing, a number of countries across the European Union and beyond have chosen to close their borders to arrivals from the UK over fears of the newly-identified Covid-19 variant.

India has become the latest country to announce a travel ban, following Hong Kong, Canada, Switzerland and Germany. Norway, Belgium and the Irish Republic have so far suspended all flights from the UK. Austria is also expected to bring in a ban, while Bulgaria has suspended flights to and from the UK from midnight tonight.

On Sunday evening, France shut its border with the UK for 48 hours, meaning no lorries or ferries will be able to set off from the port of Dover. Queues of freight lorries began to build up in the early hours of the morning.

The French government said on Monday that it will establish a protocol “to ensure movement from the UK can resume”.

European leaders are currently holding an emergency meeting in Brussels to discuss the a co-ordinated response.

In a Twitter post by the French Embassy in the UK, French Transport Minister Jean-Baptiste Djebbari said: “In the next few hours, at European level, we’re going to establish a solid health protocol to ensure that movement from the UK can resume”.

He added that the “priority” was to “protect our nationals and our fellow citizens”.

The news follows a tough week for airlines, after London and the South-East of the UK were put into Tier 4 restrictions set to last over the Christmas period and likely into the New Year, disrupting thousands of plans to spend the holidays with families scattered across the country.

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