April’s GDP Numbers Lowest on Record:

Last week saw the markets take a rare glance at reality. US Fed chairman Jerome Powell gave a fairly negative assessment of the economic outlook, presumably having just looked outside. This caused a large reaction with markets selling off about 5 per cent. Most investors appeared to decide reality wasn’t for them, however, as equities are climbing again. While on the surface it seems unfathomable that the FTSE would be up the same day it was announced the UK economy shrank by 20 per cent (although this could change quickly), we hope central banks can continue to keep the money flowing lest we add a market crisis to an already long list of real world problems.

Elsewhere, real-world problems keep escalating. A recent uptick in Covid-19 cases in the US correlates well with the easing of lockdown. Now talk of a second wave has started before the first wave has even passed. Locally we’re enjoying some classic no-deal Brexit talk. But the reality of coronavirus and recession will surely mean previous positions will need to be redrawn.

UK: Record Fall in April’s GDP Numbers sees 20% Drop

The scale of the lockdown damage on the UK’s economy became apparent with the release of April’s GDP numbers. The latest data from the Office for National Statistics show April’s GDP numbers were down 20.4 percent. That was following a drop of 5.8 per cent in March. Monthly GDP numbers can be volatile but the figure for the rolling three-month period to the end of April saw GDP drop 10.4 per cent. The fall is the largest since records began.

The decline was led by a sharp drop in construction output, as well as steep falls in retail sales, transport and hospitality. The size of the drop was dramatic but the breadth of the contraction was also eye catching. Almost all sectors of the economy saw activity decline over the three-month period. The only manufacturing sector to see any growth was pharmaceutical products and the only services sector to register growth, public administration and defence, grew by 0.2 per cent.

OCADO: £1BN Fund Raising as Online Grocer Spies Opportunities 

Shares in online supermarket Ocado have seen stellar recent performance as online food retail is one sector to see no interruption to demand during lockdown. The online supermarket and distribution technology provider’s rapid share price growth of the last three years has continued in 2020. Ocado shares are up 58 per cent so far this year, including this week’s retreat in UK shares generally.

This week the company has taken advantage of positive sentiment to raise a further £1bn, in a combined share sale and convertible bond issue, to add to the £1.3bn it has raised since 2018. Ocado aims to capitalise on the surge in online grocery shopping and add to the recent distribution deals it has signed in Canada, France, Sweden, Japan and with M&S in the UK. Ocado has long seen itself as a growth tech company rather than a supermarket and with only two years of profit in the last 20, investors appear to be buying into the growth story rather than the company’s own modest performance as a retailer.

 

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