Market Round-up: 13-17 July

Thomas Watts


This week

In a week that saw the closest ever pictures of the sun released, a mere 77 million miles from its surface, a much closer inspection of the UK’s retail sector shows that sales are also heating up, just not quite at 15 million degrees Celsius.

With lockdown restrictions being slowly eased as life returns to as normal as it can be, retailers have experienced a release of pent-up demand after the Coronavirus lockdown spurred a rebound in retail sales last month, although overall consumer spending remains far below normal levels, surveys showed on Tuesday. The British Retail Consortium trade body announced that retail sales values rose by a staggering 3.4% in annual terms for June, the biggest increase since May 2018. Although such numbers need to be taken in context, heavily skewed by the flattering comparison with unusually weak sales in June 2019 and an easing of lockdown this year.

However, a beleaguered high street will take any good news it can at the moment, especially considering it endured a 19.1% fall in spending recorded in April, when lockdown restrictions were at their peak. Food, computing and furniture sales were bright spots last month as it seemed consumers were intent on revamping their lockdown abodes, however, clothing sales remained stubbornly weak.

The sun was certainly shining on European markets this week, with Travel and Leisure stocks leading the way. The sector was truly flying as news that a vaccine for COVID-19 could be on the way sooner than anticipated, leading to the possibility consumers may feel safer to travel again. Flying closer to the sun, hard-hit airline stocks like British Airways owner, IAG, and Ryanair soared around 10% each, while cruise operator Carnival jumped 11.4% on the news. The sector’s strong performance dragged the Eurostoxx benchmark up by 1.7% to levels not seen since 5th March.

The end of the week also saw more good news for the Eurozone as news broke that the bloc’s economy may contract less this year than the European Central Bank had forecast and its recovery could also be quicker. The quarterly survey forecasts the economy shrinking by 8.3% this year, a downgrade from its May projection of a 5.5% drop but not as destructive as the ECB’s own estimate for an 8.7% drop. For next year, growth is seen at 5.7%, above the ECB’s previous 5.2% estimate in June.

Next week

With temperatures set to soar during the coming week, if past images of the UK’s beaches have taught us anything, it’s that we can be fairly confident that thousands should flock to the coast to get a little sun during lockdown.

Confidence should be the watch word of the week, especially in Europe as Thursday sees consumer confidence figures released, detailing just how the European consumer has been spending their cash over the past month. With confidence unsurprisingly tumbling in the wake of Coronavirus, last month’s reading did show a consecutive negative reading but some signs of a recovery nonetheless. Economists will be hoping that this trend continues as shops re-open across the continents’ beleaguered rues and strasses.

Dented but improving consumer confidence numbers could act as a precursor to PMI numbers released across Europe and the UK on Friday. PMI numbers are a useful part of the economist’s toolkit as they act as a leading indicator of economic health - businesses react quickly to market conditions, and their purchasing managers perhaps hold the most current and relevant insight into the company's view of the economy. Interestingly, the two largest economies in the Eurozone, Germany and France release data for both their Manufacturing and Services sectors an hour before the UK does.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in July 2020.