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MARKET REPORT: Second wave fears fuel global markets sell-off

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market report second wave fears fuel global markets sell off

Global markets tumbled as concerns grew about a second wave of the coronavirus and cities including London were hit by fresh restrictions.

The FTSE 100 index of blue-chip companies fell 1.73 per cent, or 102.54 points, to 5832.52 as investors fretted about the damage the pandemic is doing to the economy.

Millions in London, Essex and York were yesterday told they were no longer allowed to mix indoors with other households in places such as homes, pubs and restaurants, dealing another blow to the struggling hospitality industry. 

The FTSE 100 index of blue-chip companies fell 1.73 per cent, or 102.54 points, to 5832.52 as investors fretted about the damage the pandemic is doing to the economy

The FTSE 100 index of blue-chip companies fell 1.73 per cent, or 102.54 points, to 5832.52 as investors fretted about the damage the pandemic is doing to the economy

That was after the UK reported another 18,980 cases and 138 deaths.

Amid the turmoil, with new restrictions also being announced in other countries, the Euronext 100 index shed 2.2 per cent. 

In the US, the Dow Jones Industrial Average fell by 1.2 per cent as traders reacted to news that jobless claims had surged by 898,000 last week.

They were also spooked by comments from US Treasury Secretary Steve Mnuchin, who poured cold water on suggestions that a big economic stimulus package could be passed before November’s presidential election.

Stock Watch – Novacyt

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Shares in Covid-19 test maker Novacyt edged up after it sealed a £10million takeover of one of its manufacturers.

The firm, which has been supplying the NHS during the pandemic, said it had bought IT-IS International Ltd.

IT-IS is the only manufacturer of two Novacyt instruments used in laboratories for rapid coronavirus testing.

Novacyt chief executive Graham Mullis hailed the deal as the company’s shares rose 1.2 per cent, or 10p, to 840p after the announcement.

Russ Mould, investment director at AJ Bell, said investors were looking at ‘a sea of red’ in global equity markets.

‘It is becoming more apparent that the pandemic could still be raging well into 2021 and so economic prospects have become even more clouded,’ he said. 

‘Ultimately, investors are unnerved by what’s going on with Covid-19 and how that is negatively impacting jobs and the ability for many businesses to succeed.’

Airline stocks were among those getting hammered by fears about fresh restrictions, with British Airways owner IAG down 2.5 per cent, or 2.5p, to 95.76p.

Easyjet too fell 3.3 per cent, or 16.3p, to 480.5p, while Ryanair sank 4.3 per cent, or €0.52, to €11.78. Industry experts have warned that airline passenger numbers will not recover before 2023 at the earliest.

The gloomy outlook dragged on stocks that are seen as being closely-tied to the economy as well. 

Housebuilder Persimmon fell by 2.1 per cent, or 55p, to 2526p, while retailer Next fell 2.4 per cent, or 142p, to 5894p and lender Barclays dropped 1.4 per cent, or 1.42p, to 100.12p.

Premier Inn hotels owner Whitbread fell 3 per cent, or 67p, to 2178p.

John Roe, a strategist at Legal & General Investment Management, said markets had been ‘surprised by the progress of the virus in the second wave’.

Meanwhile, packaging company Mondi fell 4.6 per cent, or 76.5p, to 1591p after it warned of reduced profits in the third quarter. 

In a trading update, the firm said it expected underlying profits to drop 20 per cent to £277million in the three months to September. 

The company blamed its problems on lower demand for materials such as paper from schools and offices during coronavirus lockdowns, as well as lower average selling prices and currency swings that ate away at profit margins.

However, one bright spot was demand for corrugated packaging from online retailers which the firm said had ‘remained strong’.

E-commerce giants such as Amazon, Asos (down 3.8 per cent, or 181p, to 4644p) and Boohoo (down 1.5 per cent, or 4.6p, to 313.4p) have reported booming sales during lockdown as shoppers have flocked online while staying indoors.

Because of the strong demand for cardboard packaging, Mondi said it was in talks with some customers about price increases.

A spokesman for the firm added: ‘The macro-economic outlook continues to be uncertain, however we are confident that the group will continue to demonstrate its resilience, while remaining well-positioned for when the recovery takes place.’

This post first appeared on dailymail.co.uk

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‘Zero emission mandate’ could force makers to sell more electric cars

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zero emission mandate could force makers to sell more electric cars

Manufacturers could be forced to sell a rising share of electric cars each year to speed-up the shift to zero-emission vehicles, according to reports.

The Times said ministers are considering a California-style ‘zero emission vehicle mandate’, which would be similar to the one introduced in the US state in the 1990s and demand a minimum volume of plug-in cars are sold by brands.

MPs believe the mandate would be the most effective way of shifting the UK’s car make-up to electric vehicles, to bridge the proposed ban on sale of petrol, diesel and hybrid cars in 2035.

Mandate for electric cars: The government is considering plans to force vehicle manufacturers to sell a rising share of plug-in models each year to speed-up the shift to zero-emission vehicles, according to reports

Mandate for electric cars: The government is considering plans to force vehicle manufacturers to sell a rising share of plug-in models each year to speed-up the shift to zero-emission vehicles, according to reports

Under the mandate, car makers would be required to sell an increasing volume of zero emission vehicles as a share of their overall sales.

If they fail to meet their EV target, they would be able to purchase credits from other manufacturers.

The government said it would consider a mandate in a response to a Committee on Climate Change report published in the summer.

It said it recognised a need to ‘go further than the existing regulatory regime to reduce CO2 emissions from road transport’, and that it was are looking into a mandate as part of the Transport Decarbonisation Plan. 

Already in the first nine months of 2020, demand for battery electric cars is at a record high.

Over 66,600 pure electric vehicles have been bought by the end of September – a year-on-year increase of 184 per cent increase, which has seen registrations almost double the full-year sales of pure EVs for the entirety of 2019 with three months to spare.

These electric-only cars now account for 5.4 per cent of all vehicle registrations in the UK, with that market share set to continue an increase as demand for diesel cars in particular shrinks and more people convert to zero-emission model while grants are available.

If a mandate was put in place it would allow the government to retract these subsidies and tax incentives that are currently exclusively available to buyers of electric cars, such as the £3,000 Plug-in Car Grant and VED road tax exemption. 

Sales of battery electric vehicles are booming at the moment, as motorists are taking advantage of incentives, such as the £3,000 Plug-in Car Grant, when purchasing EVs

Sales of battery electric vehicles are booming at the moment, as motorists are taking advantage of incentives, such as the £3,000 Plug-in Car Grant, when purchasing EVs 

And the Government has made no secret that it wants to phase out the availability of electric-car deals, which it outlined in its Road to Zero document in summer 2018.

It said: ‘As the market becomes better established and more competitive, the need for direct government financial support will decrease.

‘We therefore expect to deliver a managed exit from the grant in due course and to continue to support the uptake of ultra low emission vehicles through other measures.’

The Times reported that ministers also believe a mandate would help to attract electric car manufacturers to setup production lines in Britain to boost the economy. 

It comes as government is expected to announce plans to fast-track the deadline for the banned sale of petrol and diesel cars, which could be brought forward to as early as 2030.  

MPs last week urged the Prime Minister to accelerate the ban to a decade’s time in order to help the Government achieve its target of reaching net zero emissions by 2050.

The plans, which would dramatically accelerate the transition to zero-emission vehicles, are expected to be announced later this year alongside a series of new clean energy policies.

Downing Street had intended to unveil the blueprints in September, but the announcement will now be pushed back as ministers focus on soaring numbers of coronavirus cases, energy and transport insiders told the Guardian last month.

The ban, backed by the Committee on Climate Change, is likely to be set out by the Government in autumn alongside plans for Britain to become a carbon-neutral economy by the middle of the century.

Ministers are eager to pull the plug on grants, subsidies and incentives currently offered to owners of electric cars, stating that 'the need for direct government financial support will decrease'

Ministers are eager to pull the plug on grants, subsidies and incentives currently offered to owners of electric cars, stating that ‘the need for direct government financial support will decrease’

Greenpeace UK’s head of politics, Rebecca Newsom, gave her full support to a mandate. She said: ‘Moving the ban on petrol, diesel and hybrid cars and vans forward to 2030 is an absolute must if the government is to meet its legally binding climate commitments. Any later and it becomes almost impossible. 

‘But a ban alone won’t see this change take place without the policies that force it over the line. That’s why a zero emissions vehicle mandate for car manufacturers would be an incredibly smart move to bring new jobs to UK. 

In order to dangle the carrot for people buying a new car, the government must use the stick with manufacturers to ensure costs come down and sales go up.’

A new study by vehicle breakdown recovery provider Green Flag said the average UK driver now expects to purchase an electric car within the next four years. 

The poll of 1,500 drivers found that more than half (54 per cent) are today in favour of electric cars, with fuel savings and eco-friendliness the biggest perks, followed by lower servicing an maintenance costs and the convenience of being able to charge a vehicle at home.

Mark Newberry, commercial director at Green Flag, said: ‘Our research has found that the main concern for drivers converting to electric is running out of charge mid-journey. Try to think back to the last time that you broke down because you ran out of petrol?

‘We want to reassure drivers that it only takes a few small adjustments to enjoy an electric vehicle – if you look after your car, prepare for your journey and drive carefully you should see minimal changes to your driving routines.’

SAVE MONEY ON MOTORING

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Men and younger workers more likely to shun pensions during pandemic

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men and younger workers more likely to shun pensions during pandemic

A quarter of savers have stopped or cut back on paying into their pensions during the Covid-19 crisis and more are considering doing so, new research reveals.

Men and younger workers are more likely to shun pension saving to make ends meet than women and older workers in response to the upheaval in jobs and personal finances caused by the pandemic, the study shows.

The findings from Hargreaves Lansdown echo a separate survey, which found many people are pausing or reducing contributions because they need money for essential spending, were made redundant or were furloughed. 

Covid-19 crisis: Men and young workers are more likely to shun pension saving to make ends meet

Covid-19 crisis: Men and young workers are more likely to shun pension saving to make ends meet

Some 14 per cent of people have cut their contributions, and 11 per cent have cut them entirely, while 8 per cent may do so in future, according to the latest survey of 2,000 adults in September.

The trend could cause serious damage to people’s retirement prospects as they wind up with smaller pots, but auto-enrolment comes with a failsafe.

(Source: Hargreaves Lansdown)

(Source: Hargreaves Lansdown)

Employers must re-enrol staff who leave once every three years, unless they choose to stay opted out.

But employers do this on their own schedule, usually on a rolling basis starting from when they first introduced auto enrolment, not timed on when a worker dropped out.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, says younger people may be quicker to stop contributions because their pension feels like a more distant consideration, so it is an easy cost to cut.

But she points out that the money you put in when you’re younger works the hardest for you – because compound growth boosts pots more over longer periods – so this will come at a higher cost than they expect. 

Coles adds that if you cut back or stopping paying into a pension the impact will also be magnified, because you lose pension tax relief from the government and free cash from your employer too.

Who pays what: Breakdown of minimum contributions under auto-enrolment 

How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service)

How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service)

But she acknowledges that if you are now on a lower income, have cut out luxuries and shopped around to minimise the cost of essentials and are still struggling, then you may need to pause pension contributions.

‘The good news is that the way that automatic enrolment works should stop temporary pauses in payments becoming enormous gaps,’ says Coles.

‘If you opt out of a workplace pension, you will automatically be put back in after three years, so even if you don’t get round to kick-starting payments yourself, you’re likely to accidentally do the right thing.’

Meanwhile, Coles says some people will have seen their pension funds drop in value due to big market falls early in the Covid-19 crisis, but some are well ahead of where they started the year, depending on where they are invested.

‘Most pensions aren’t just invested in equities either. Most will have a balance of different assets, so overall pension funds didn’t fall as far, and have recovered significantly,’ she says.

‘By the end of June, according to Moneyfacts, the average pension fund was only 4.4 per cent down from the start of the year.

‘It’s worth taking a look at where your pension is invested, and how it is performing, not just to see how it’s doing, but to be certain it reflects your aims and objectives.

‘If you have a workplace pension and you’re not sure how to do this, talk to your HR department, and ask them to send you details.’ 

Read our guide to checking if your work pension is up to scratch here. 

What should you do about your pension if you are strapped for cash?

Pension experts urge people to keep paying into pensions if they can afford it, to avoid harming their chances of a decent retirement.

Find out the three important rules to remember, and the options for what to do about different types of pension here. 

You can keep paying in to some types of pensions even if you have left your employer, and payments into pots based on 80% of salary are protected if you were furloughed. 

Read a 10-step guide to sorting out your pension here. We also have tips for people in their 20s wanting to get their pensions on track here, and help for older savers nearing retirement here. 

TOP SIPPS FOR DIY PENSION INVESTORS

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Bellway restores dividend thanks to strong summer house sales

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bellway restores dividend thanks to strong summer house sales

Homebuilder Bellway says the government’s stamp duty discount has enabled it to resume dividend payments after it recorded high sales during the late summer period.

The Newcastle-based firm scrapped its interim dividend in late March after it was forced to shut building sites and sales centres in response to the coronavirus pandemic.

House purchases took an inevitable tumble, but soared in the last few months as lockdown restrictions were relaxed. Reservations shot up 30.6 per cent in the nine weeks from August 1 compared to the same period in 2019.

Bellway said the stamp duty cut introduced in early July has enhanced 'consumer confidence'

Bellway said the stamp duty cut introduced in early July has enhanced 'consumer confidence'

Bellway said the stamp duty cut introduced in early July has enhanced ‘consumer confidence’

Bellway also revealed it had a record order book valued at £1.87billion a fortnight ago and is expecting to sell about 9,000 homes in the new financial year at an average price of around £290,000.

The FTSE 250 group said the stamp duty cut introduced in early July has boosted ‘consumer confidence,’ as has the Help-to-Buy shared equity scheme and a revival in the used property market.

Chancellor Rishi Sunak suspended payments of the tax on home buys under £500,000 to try and reinvigorate the sector. The following month, house prices rose at their fastest monthly pace in over 16 years.

Total reservations in the ‘typically quiet month’ of July were still down 13.6 per cent on the previous year’s levels though, at 140 per week.

Reservations were also going strong before the pandemic. From August 1, 2019, to the start of the lockdown on March 23 this year, they averaged 211 per week, ten more than the same timeline the previous fiscal year.

In the year to July 31 though, the coronavirus caused the FTSE 250 property developer’s revenues and housing completions to both decline by approximately 30 per cent, while pre-tax profits plummeted by 64.3 per cent to £236.7million.

Covid-19 caused Bellway's housing completions to fall by 31 per cent in the year to July 31

Covid-19 caused Bellway's housing completions to fall by 31 per cent in the year to July 31

Covid-19 caused Bellway’s housing completions to fall by 31 per cent in the year to July 31 

The company said it took a Covid-19 related-expense of £25.8million, with almost £10million coming from cancelled land deals and over £14million arising from disruption to construction activity.

Further provisions covering fire safety and re-cladding measures following the release of new government guidance in January in response to the Grenfell Tower disaster added another £46.8million in costs.

Bellway’s chief executive James Honeyman warned that the residential construction industry faces several significant risks in the coming year.

He wrote: ‘Output for the full year will depend upon the continuation of sales demand, which could be affected by sector-wide risks such as rising unemployment and the forthcoming changes in both the stamp duty and Help-to-Buy rules.

‘The Board also recognises the risk posed by the uncertain outcome of future trade deals with both the European Union and the rest of the world.’

He though that Bellway’s ‘strong balance sheet not only instils confidence in times of uncertainty, but it also provides substantial capacity for disciplined land and work-in-progress investment.’

Julie Palmer: 'The loss of more jobs and people becoming increasingly worried that they won't always have a reliable income to support a new home will only add to the barriers for buying'

Julie Palmer: 'The loss of more jobs and people becoming increasingly worried that they won't always have a reliable income to support a new home will only add to the barriers for buying'

Julie Palmer: ‘The loss of more jobs and people becoming increasingly worried that they won’t always have a reliable income to support a new home will only add to the barriers for buying’

Trade body The Construction Product Association (CPA) released analysis yesterday predicting that new private housing constructions will fall by almost half and the number of completed private dwellings will drop by around a quarter in 2020.

This is a considerable improvement on its forecast in August; however, the organisation believes the housebuilding industry will not recover its pre-pandemic building levels until 2022.

‘Bellway will be wary that many people may start to hold off buying,’ remarked Julie Palmer, a partner at corporate restructuring firm Begbies Traynor.

‘The stamp duty break and the end of help-to-buy in April 2021, may not be enough to keep the market ploughing forward while the loss of more jobs and people becoming increasingly worried that they won’t always have a reliable income to support a new home will only add to the barriers for buying.’

Shares in the business were down 3.8 per cent at midday to £25.26.

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