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WEEKLY MARKET ROUND-UP – 10/07/20

Chancellor promises UK another £30bn in summer mini-budget

On Wednesday (8 Jul) Chancellor Rishi Sunak announced a raft of new stimulus measures in a mini-budget aimed at revitalising key segments of the UK economy and stemming a further rise in UK unemployment, which is currently the highest it’s been since 1986.

Under the current furlough scheme, some 9.4m UK workers receive 80% of their wages from the government (up to a maximum of £2,500 a month). The emergency scheme was originally slated to end in July but was extended to October, with employer contributions. From August, employers must pay National Insurance and pension contributions; from September they must pay 10% of their wage bill rising to 20% in October.

Mr Sunak rejected anxious calls to extend the furlough scheme beyond October on the grounds that it would give “false hope” to those who might no longer have a job to return to. Instead, he announced a government ‘bonus’ scheme that will pay UK firms £1,000 for every staff member retained for three months after the end of the furlough scheme. The bonus scheme could cost as much as £9.4bn.

Elsewhere, the Chancellor cut VAT in the hospitality industry on food, accommodation and tourist attractions from 20% to 5%; a £4bn cash injection aimed at protecting some 2.4m UK jobs.

He also announced a scheme offering Britons ‘50% off’ (terms and conditions apply) when dining out in August. The ‘Eat Out to Help Out’ discount is thought to cost around £500m while safeguarding 1.8m jobs. Other measures announced included an additional £500m for Wales, a £2.1bn ‘kickstart’ job creation scheme for young people, a temporary stamp duty holiday costing around £3.8bn, as well as a £1.6bn package of loans and grants for the arts sector and a doubling of jobcentre staff.

Turning soft...

SoftBank Group saw its share price rise 4.6% on Tuesday (7 Jul) pushing it to highs last seen in March 2000, helped by progress on its share buyback programme and improved performance from some of its underlying investments.

The Japanese conglomerate, which runs the technology-focused venture capital Vison Fund, has seen its share price more than double since its March low, when it sustained heavy losses during the coronavirus-induced market falls.

In March, chief executive Masayoshi Son outlined plans to sell around $41bn of its assets in order to fund the purchase of its own shares, with the company having completed $4.7bn of share buybacks by mid-June. However, its investments have also recently helped boost its fortunes, with one of its US start-ups, the online home insurance provider Lemonade, seeing its share price double on its stock market debut last Thursday (2 Jul). In late June SoftBank announced plans to sell roughly two-thirds of its stake in US phone carrier T-Mobile, raising around $21bn for its coffers.

Quilter Market Explainer: Imagining the 'new normal'

In response to the severe market volatility that has accompanied the outbreak of the global coronavirus pandemic, Quilter has launched the Quilter Market Explainer, a special fortnightly webcast for advisers and clients.

All our previous broadcasts in this series are available on demand, to listen please click on the play button.

The next Explainer will air at midday on 10 July and will feature experts from across Quilter discussing the outlook for investment markets in a post-coronavirus world.

Our panel will discuss how the global pandemic has impacted sectors and regions, and the risks and opportunities available to investors as we navigate the ‘new normal’.

Click here to find out more.

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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