Hello, and welcome to our latest client update at the end of what has been an eventful week. In the UK, Prime Minister Boris Johnson declared that it was “a time to be ambitious,” Leicester became the first city to go into a local lockdown and 12,000 jobs – largely on the high street – disappeared in two days.
The Chinese Government passed its controversial Hong Kong security law and immediately set about arresting protesters, prompting condemnation around the world.
We have summarised all the main events below and, as usual, the stock market figures quoted were correct at close of business in the relevant market on Wednesday evening, with the commentary written on Thursday morning.
The Latest News
Jersey has today reopened its borders for non-essential travel for the first time in 100 days. The resumption of travel links came a day after it was confirmed that Jersey has one new case of Coronavirus, a cleaner at a private school who is Asymptomatic, ending a 2 day period of no known active cases.
The first BA flight arrived from Heathrow at 9am this morning. Passengers due to travel to Jersey are being reminded that as part of the new ‘safer travel process’ agreed by politicians, that they must complete a registration form the day before they travel or face significant delays on arrival.
The restoration of air links by BA and easyJet, plus the first Condor Ferries service to Poole scheduled for tomorrow, followed a states Assembly vote on Wednesday after a debate lasting 10 hours, to back ministerial proposals for a new border policy. Anyone arriving by sea or air will be swab tested for Covid-19 and will be contacted daily by the contact tracing team, however they will not have to isolate unless they choose not to be tested. Results will be sent by text message and will currently take 2 days to process although it is hoped to reduce this to 12 hours.
The Island’s pubs also reopened on Wednesday 1 July and are now able to provide a seated only alcohol service.
As we have suggested above, this was a week when a lot happened, but the headlines must surely go to Hong Kong.
The Chinese Government duly passed the new security law, effectively making any protests or dissent against Beijing a criminal offence. The move was widely condemned around the world as protesters were arrested almost immediately and now face lengthy jail terms.
Both the Prime Minister and the Foreign Secretary criticised the move as a breach of the agreement made when the UK handed Hong Kong back to China, and the door has been opened for up to 3m Hong Kong citizens to come to the UK.
Back at home this was another week of deepening gloom on the high street. More than 12,000 jobs disappeared in two days, with the majority of the losses coming on the high street as John Lewis, Harrods and the owners of Top Shop all announced store closures and/or redundancies.
Perhaps even more tellingly, Britain’s retailers paid just 13.8% of their rent for the quarter. Payments were due on 24th June and estimates suggest that £2.15bn of commercial rent was unpaid.
Away from the UK, there were worries of a second Coronavirus ‘spike’ in the US – especially in California, Florida and Texas – and the US Federal Reserve reminded the country’s banks to be ‘prudent,’ warning of a potential $700bn (£559bn) loss if the pandemic led to a prolonged economic downturn.
After earlier border clashes, tensions continued to run high between India and China: the Indian government duly banned 59 Chinese apps – including social media platform TikTok – claiming they posed “a threat to the sovereignty and security” of the country.
There was, though, plenty of good news to balance the bad. As we mentioned above, Prime Minister Boris Johnson said “now is the time to be ambitious” as he launched a ‘new deal’ programme of investment in the country’s infrastructure. Chancellor Rishi Sunak will follow this with a fiscal statement at some point in July when – among other things – he is likely to unveil a temporary cut to VAT to boost spending.
The UK’s hospitality industry will re-open on July 4th and there was some good news on the jobs front, with the European Space Agency picking Leicester for its space tech incubation centre.
Whether you file this under ‘good news’ or ‘bad news’ probably depends on how you voted in the Referendum, but the UK will now definitely leave the EU at the end of this year. 30th June was the last date on which an extension to the transition period could be agreed, and the UK made no such request.
The Stock Markets
This was probably the most ‘well behaved’ week on which we have reported, with none of the sharp stock market movements we saw back in March and April.
Despite the continuing tensions between the two countries, both the Chinese and Indian stock markets were up by 2%. China’s Shanghai Composite Index rose to 3,026 while India’s stock market built on last week’s gains, climbing to 35,414.
The other major markets in the Far East were all down in the week. Hong Kong fell 1% to 24,427: the Japanese market was down 2% to 22,122 while South Korea recorded the week’s biggest fall, dropping 3% to 2,107.
In the US, the S&P 500 index was another market to gain 2%, ending the week at 3,116, but the Dow Jones only managed a 1% gain to 25,735. That was a story repeated in Europe as the German DAX index and the French stock market both rose 1%, to 12,261 and 4,927 respectively.
In the UK, the FTSE-100 index duly followed suit, ending Wednesday evening up 1% at 6,158. The pound was unchanged in percentage terms against the dollar, closing the week at $1.2474.
In all the time we have been writing this update we have been consistently optimistic about the ability of economies in general – and the UK in particular – to recover from this crisis. That view was endorsed this week by Bank of England economist Andy Haldane. Speaking on 30th June he said that the UK economy was still on course for a quick, V-shaped recovery, with the recovery in the UK and globally having come “sooner and faster” than expected.
What is undeniable though is that the pandemic has hastened the pace of change – and that is especially true on our high streets. Five or ten years from now our high streets will be very different to the parades of shops we see now. If retailers are to survive they will need to be innovative – as we have said previously, all businesses will need to find new ways of bringing new products to new markets.
But no country has a greater history of innovation than the UK and that – combined with investment and enterprise – will ultimately see our economy recover from the downturn. It will be a different economy, but it will be an economy that has recovered.
And now to the week’s lighter news – that is, if you consider the latest step towards Big Brother’s embrace to be ‘lighter news’.
Older readers may remember the very first digital watches and their LED displays. The display was unreadable in a bright light: you could only tell the time in a darkened room.
Now we read that the latest Apple watch will be able to tell when you’re washing your hands. It will time you, tell you to ‘keep washing’ if you haven’t done it for long enough and give you a metaphorical pat on the back when you’ve complied with Silicon Valley’s diktats on hygiene.