Whilst the FTSE is still managing to cling onto gains heading into the afternoon, it looks uncertain as to whether those gains will be maintained into the close. The rest of Europe has already slipped into negative territory and Wall Street is pointing to a lower start on the open.
The Fed’s bazooka efforts and record-breaking US fiscal stimulus package haven’t been able to turn the tide in the market; a few more ingredients in addition to monetary and fiscal stimulus are needed before a sustained recovery will be seen. These include:
1. Improving coronavirus numbers, both in Europe and US
2. Vaccine
3. Confirmation that China isn’t experiencing a second wave as comes out of isolation.
Food Retailers are obvious winners in this situation. Consumption of essential goods will remain high and even increase, as we have seen people stock piling in panic. There are not enough online delivery slots to go around. Supermarkets are even taking on more staff to cope with the increased demand. The Chancellor’s business rates holiday is another bonus for the sector. Sainsbury (LON:SBRY), Morrisons and Ocado (LON:OCDO) are still worth watching.
Business services are able to continue operations, with more working from home. A more intensive use of web applications, data centre services, internet providers and video conferencing with see these providers share price remain resilient or bounce back quickly from a broader market downturn. Share here include BT, Zoom.
This was initially one of the less affected sectors given that it is not a large exporting sector and imports little. Supply chain disruption, on the whole, hasn’t been an issue. However, the construction sector is now likely to see a hit to demand as business investment in new business will be postponed. Construction companies rarely have overcapacity, which limits the sectors ability to catch up when a recovery is underway. House builders will need to see a recovery in consumer confidence.
Travel and Tourism
These stocks are experiencing unprecedented troubles. Whilst the US is set to provide $50 billion to support the aviation industry in its rescue package the same has not happened in the UK so far. Travel restrictions are firmly in place. Whilst they are only temporary, the end is still several months off. Demand will rebound as soon as restrictions are lifted although. That said business travel could struggle to reach previous levels as businesses find alternative ways of doing things. IAG (LON:ICAG), Ryanair and easyJet (LON:EZJ) could rebound.
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