Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

More Woe For Boohoo, As Markets Look To Sunak

Published 08/07/2020, 10:41
Updated 03/08/2021, 16:15

Having got off to a good start on Monday, European markets turned tail on Tuesday and have continued to look soft this morning, on concern that rising cases in the US across the southern states, could stall the recovery there.

Covid-19 cases have been rising sharply across the US sunbelt for a couple of weeks now, and while this was causing some concern about delays to reopening plans, the death rate wasn’t following suit. This appears to no longer be the case, with the death rate starting to rise sharply amidst a concern that the authorities in some regions could run out of ICU capacity.

Comments from Atlanta Fed President Raphael Bostic didn’t help, as he expressed concern that the US economic rebound, which had been looking quite robust, was showing signs of stalling as a result of the rise in cases.

A WHO official also warned that it wouldn’t be a surprise if coronavirus deaths started to rise sharply again, as the virus continued to sweep a path across North and South America.

This overnight weakness has seen European markets open lower this morning, with all eyes on UK Chancellor Rishi Sunak’s statement to the House of Commons later today where he will put some additional flesh on the bones from last week’s speech by Prime Minister Boris Johnson.

A lot of the detail does appear to have been heavily trailed already, with help for the arts to the tune of £1bn, as well as incentives for employers to hire trainees or apprentices in the 16-24 age group, to help gain important work experience, at a time when the UK economy is likely to see unemployment levels rise sharply.

It is also expected that the rail companies will see their emergency contracts extended as a result of the continued lower passenger footfall on their services. The current extension is due to expire in September.

A stamp duty holiday extension has also been widely touted, with the Chancellor expected to raise the minimum threshold to £500k, though it’s hard to see how that will help that much. People don’t tend to move if they are worried about their jobs.

We could also find out whether the Chancellor plans to tweak the furlough scheme further, in terms of making it more sector focussed, particularly in the hospitality sector, which has been hit hardest by the lockdown measures.

On Monday the government also outlined a £3bn increase in green investment to help fund energy saving measures in schools and other public buildings.

Boohoo (LON:BOOH) shares have been hit hard over the past couple of days over reports that Jaswal Fashions a factory in Leicester, and a reported supplier to Boohoo, was operating below the required standards as set by UK health and Safety, and was paying below minimum wage levels. Boohoo have strenuously denied any knowledge of the malpractices, and promised an investigation. This morning Boohoo announced that they had engaged Alison Levitt, a top QC, to investigate the claims around the supply chain and help restore the brands reputation. If management were hoping that this would help stabilise the share price and draw a line under recent events, they couldn’t have been more wrong, with the shares falling again, and now down over 35% this week.

These additional declines appear to have more to do with a number of key social media influencers announcing they were pulling their support for the brand, while Next, Asos and Zalando have dropped the company’s products over the allegations.

HSBC (NYSE:HSBC) shares have fallen sharply on the open on reports that the US government could target the Hong Kong dollar peg in retaliation for China implementing its new security law. Whether this would actually happen is unclear, however it would be a major escalation were the US to go down the route of destabilising a currency.

Warehouse and industrial property manager Segro (LON:SGRO) announced this morning that it had received up to 93% of the £37m rent it was due on the current quarter, after adjusting for reprofiled rent payments agreed with its customers.

UK and US transport provider FirstGroup PLC announced a rather sobering set of full year numbers this morning, reporting a statutory loss of £152.7m, for the year ended 31st March. Most of this loss came about as a result of a poor performance in its US operation, and various charges and costs there. On the plus side there was a decent performance from Great Western and the West Coast partnership, however all of this can’t disguise the fact that this is rear view mirror stuff, and the outlook is markedly different now. This is why the company has suspended any further guidance, with the company receiving government help for the lower passenger numbers on its UK services.

The pound appears to be little moved by the current shadow boxing going on with respect to the EU/UK trade talks. Prime Minister Boris Johnson repeated the UK’s willingness to leave the EU without a trade deal in comments to German Chancellor Angela Merkel, if the EU were unwilling to be more flexible.

Gold is higher again, hitting its best levels since November 2011, and an eight and a half year high, as haven demand pushes it ever closer to $1,800 an ounce.

US markets look set to recover some of yesterday’s lost ground with a more positive open later today.

Boeing (NYSE:BA) shares could be in focus on reports it has settled 90% of the death claims in respect of the 2018 737 MAX Lion Air crash which killed 189 people. There aren’t any details as to how much has been paid out.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.