Furlough fears send UK stocks lower

Both Rishi Sunak and the BoE governor Andrew Bailey have put their support behind the current plan to end the furlough scheme in October, with UK stocks in the firing line as a result. Meanwhile, the recent stamp duty holiday has sparked a surge in house prices, which have reached a fresh record high in July.  

• US-China relations dented by TikTok and WeChat restrictions.

• UK stocks underperform as Bailey and Sunak throw support behind October furlough end.

• UK house prices spike to record high.

UK stocks are on the back foot today, with the US decision to block both TikTok and WeChat raising fears of another breakdown in relations between the US and China. While the Chinese have stated that they want to avoid another Cold War, there is certainly a significant fear that we could see retaliation towards US tech firms such as Apple or Microsoft. UK stocks are underperforming their mainland European counterparts this morning, with fears growing over a potential economic collapse in October as both Rishi Sunak and BoE Governor Bailey stand by the current plan to drop the furlough scheme in two-months’ time. With the furlough scheme now likely to end before a vaccine can be found to fully reopen the economy, we are staring at a likely spike in unemployment and bankruptcy. With such an economic jolt due on just two-months’ time, it comes as no surprise to see the UK banks under pressure this morning.  

The average UK house price has hit a record high in July, with pent-up demand released post-lockdown being enhanced by the recent government stamp duty holiday. The housebuilders have certainly gained some ground over the course of the past month, yet there is certainly a degree of hesitancy given the fear of a collapse once the Brexit transition and stamp duty holiday come to an end. One worry for investors can come from the fact that investors are largely looking for garden space in the wake of the lockdown, where housebuilders may need to realign their projects to favour houses over the high density apartment blocks that have proven so profitable in urban areas.  

Ahead of the open we expect the Dow Jones to open 154 points lower, at 27,233.