Hong Kong tensions hit stocks, B&M sales surge through lockdown

“What was shaping up as a pretty sweet week for the markets ended on a sour note as the FTSE 100 slumped on Friday morning,” says Russ Mould, Investment Director at AJ Bell.

“The index took its cue from weak trading in the US and Asia overnight as the war of words between Beijing and Washington (as well as others in the West) ramped up over the introduction of a new security law in Hong Kong.

“The suggestion that the US will no longer consider Hong Kong to be autonomous from China would affect the current special trading relationship the island enjoys.

“The deteriorating relationship between the US and China has been an uncomfortable soundtrack to the last two years or more and investors could do without it as they already look to contend with the fall-out from a global pandemic.

“Oil prices took a step back with the Brent benchmark just above $35 per barrel while gold was pretty steady at $1,721.”

B&M European Value Retail

“The retail sector as a whole may be on the floor but some participants remain on their feet, particularly those which were able to remain open throughout lockdown.

“The big sales advance for discount chain B&M European Value Retail is striking given it coincided with the worst of lockdown conditions as its homewares and groceries status allowed it to keep trading throughout.

“With people stuck at home the company’s budget DIY and gardening products have clearly gone down a storm, with stores that were closed now reopened it will be interesting to see if this proves to be a one-off phenomenon or a continuing trend.

“The company itself expects trading to settle down and this seems fair, particularly as DIY and garden specialists reopen.

“You could see a customer preference for fewer visits but higher average spend continuing and it will be interesting to see if B&M changes its operations in any way to accommodate this shift.

“As has been the case for its supermarket counterparts, the company’s bumper sales have come at a cost. The introduction of social distancing measures and paying staff premium wages to incentivise them to work at the peak of the pandemic will take a big chunk out of the outsized revenue generated in recent weeks.

“This is a bit of a warning for other retailers as they prepare to lift the shutters. Some have already warned it may not be profitable to reopen in a post-coronavirus new normal.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.


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