Markets steady despite US sell-off and record drop in UK GDP, and Games Workshop’s products have a been a hit in lockdown

“UK stocks were fairly resilient this morning despite panic stations on Wall Street last night as investors across the pond had their first chance to react to the US Federal Reserve’s gloomy assessment of the economic outlook,” says AJ Bell Investment Director Russ Mould.

“Despite the selling continuing in Asia through the night, the FTSE 100 was only off a handful of points early on, with other European markets also holding up reasonably well.

“This measured response came despite some cataclysmic UK GDP figures showing a record 20%-plus month-on-month decline in April.

“The FTSE 100, packed with multinational companies, is not really a barometer for the UK economy but even the more domestic-facing FTSE 250 did not suffer severe damage.

“Investors are not stupid, they know April was arguably the height of the lockdown. The unprecedented nature of the fall in economic activity just mirrored the unprecedented act of effectively shutting down a modern economy.

“Rightly the focus is on the shape and timing of any recovery and simmering concerns about a second wave in the pandemic are far more relevant than just how terrible backward-facing data will look.

“Brent crude oil prices are back firmly below $40 per barrel and gold remains in a pretty tight range between $1,710 and $1,740 per ounce. Somewhat reassuringly it looked as if US stocks would regain their poise going into the weekend with futures markets pointing to a sharp rebound.”

Games Workshop

“Games Workshop’s products are focused on fantasy worlds, enabling its customers to immerse themselves in different environment to everyday life.

“A lot of people will have wished they could escape 2020 given the horrors of coronavirus that the real world is having to navigate. It therefore isn’t a surprise that Games Workshop’s recent sales have been better than expected.

“The miniature figures specialist has a very loyal customer base and its products are ideally suited to a lockdown environment. A lot of people take great pleasure painting dragons and warlords as well as playing board games which involve such activities as aerial combat in the 41st millennium. All these activities can be done from the comfort of one’s own home.

“However, a lot of Games Workshop’s success is also down to its stores which act as games hubs rather than simply be a unit with shelves full of products. People like to visit the stores because its staff also tend to be fantasy fanatics, so customer engagement levels are high. Thus Games Workshop will be eager to get its remaining 226 stores open as soon as possible, representing 42% of its estate.

“There have been growing fears that analysts have been over-optimistic with revised earnings forecasts for companies which could lead to a second wave of downgrades as reality shows that recovery efforts are slow. Games Workshop is the opposite as its guidance for pre-tax profit to be 21% higher than previously expected will cause analysts to upwardly revise their estimates.”

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