FTSE has 6,000 mark in its sights, and Next prepares for darker outlook

“A positive response to results from Barclays helped lift the FTSE 100 on Wednesday, putting the index in sight of the 6,000 mark,” says Russ Mould, Investment Director at AJ Bell.

“Moving beyond this level would be a significant milestone in the recovery from the pandemic-inspired lows.

”Although Barclays has attracted flak for its commitment to investment banking, this part of the business is actually performing well at a time when the retail bank is facing a significant increase in bad debts.

“The £2.1bn provision for this risk in the company’s first quarter update reflects the fragility of the UK economy amid the lockdown, while big falls in revenue at advertising giant WPP offer an insight into the impact globally.

“US GDP numbers later will be a test of market sentiment, with a decline of 4% for the first quarter pencilled in. Also important will be the messaging from the US Federal Reserve as it delivers its latest announcement on monetary policy later."

Next

“What happens when you prepare for a full force gale and get hit by a hurricane instead? Retail champion Next is finding out.

“A few short weeks after it outlined its ability to withstand £1bn of lost sales and it has had to ratchet up substantially the impact on the business from the coronavirus crisis.

“As ever, Next is to be applauded for the transparency and detail of its communication with the market, even if the message itself is fairly unpalatable.

“There is news of a suspension to the dividend, which comes alongside other steps to boost liquidity including the sale and leaseback of warehouses and its head office. The balance sheet is going to bear the scars of this period for some time to come.

“What is concerning for the retail sector as a whole is that CEO Simon Wolfson is normally good at managing expectations.

“If he was too confident about the coronavirus impact, what about some of the business’s peers, many of which don’t enjoy Next’s inherent strengths?

“The company is adjusting to the new normal with its phased restart of online operations and initial plans to reopen larger out-of-town stores first where introducing social distancing measures will be easier.”

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