How a decision to ease lockdown will provide boost for hospitality and leisure sectors - James Rowbury

James Rowbury, Investment Research Coordinator, at Redmayne Bentley, analyses the mood in global markets.

Prime Minister Boris Johnson

Markets have been volatile this week as investors were discouraged by the prospect of a second wave of COVID-19 infections, and by the slow reopening of economies around the world.

Fears of a second wave of the virus intensified as multiple states in the US reported record daily infections.

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Among the worst hit were Arizona, Texas, Florida and California where the spike in the virus’s spread was attributed to relaxing lockdown measures.

Markets were also affected by the decision of the Governors of New York, New Jersey and Connecticut to implement a 14-day quarantine period for all travellers from states with a high infection rate.

Investors were particularly keen to sell stocks relating to travel and airlines as these experienced the sharpest losses during the week.

If the rate of infections is to continue rising, the US economic recovery would be severely challenged by the likelihood of reimplemented lockdown measures.

In the UK, Prime Minister Boris Johnson announced that the two-metre social distancing rule would be reduced to “one-metre plus” and that pubs, restaurants and cinemas would be

allowed to reopen on 4th July.

Although the Government’s medical advisers warned that it remains risky to relax the lockdown measures as they may have to be overturned in the future if the infection rate rises again, Mr Johnson prioritised getting the UK economy back on track.

The reopening of the hospitality and leisure sectors should provide a welcome boost to businesses, even if restrictions such as one-way systems, spaced queueing, and staggered staff shift patterns could hamper trading.

The FTSE 100 fell by 2.61% over the week, as investors remained tense over the recent developments. The International Monetary Fund (IMF) downgraded its outlook on the effect of the

pandemic on the global economy, resulting in a 4.9% reduction in global output in 2020.

This forecast is 1.9% lower than the previous one in April and was adjusted due to global levels of public debt soaring to record highs.

China is the sole major country whose GDP is expected to increase in 2020; it is predicted to grow by 1.2% while the GDPs of the US, UK and France are predicted to drop by 8%, 10.2%

and 12.5% respectively.

The IMF also cautioned that low-income households would be severely hit, and that global inequality is likely to increase sharply. The US S&P 500 fell 1.26% while MSCI Europe shed 1.49% this week.

Closer to home, York-headquartered house builder Persimmon announced that Dean Finch of National Express will join the firm as its new Chief Executive Officer.

Dave Jenkins, Persimmon’s current Chief Executive, announced his departure after an independent review – conducted following accusations of poor house quality – revealed that the company needs to undergo a significant cultural change, with a focus on build quality and customer service.

Persimmon’s Chairman Roger Devlin stated that Dean Finch was chosen based on his track- record of delivering significant operational and strategic success during his time at National

Express while also developing a strong culture. The market’s response to the announcement has been muted, as Persimmon’s share price dropped 1.61% this week.

Please note that investments and income arising from them can fall as well as rise in value and you may lose some or all the amount you have invested. Past performance and forecasts

are not reliable indicators of future results or performance.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the companies mentioned.

By James Rowbury, Investment Research Coordinator, Redmayne Bentley

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