DMU 24-Mar – US Fed Pledges More Stimulus; More US States Restricting Movement; Stocks Down Yesterday, Rises in Early Trading Today; Korean Stimulus

Posted on by Chris Hurst
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USA

The Federal Reserve (US equivalent to the Bank of England) is coming up with some creative new ways to inject new cash into the system and keep loans cheap and available.

It now says that it will “lend against student loans and credit card loans as well as backing corporate bond-buying”.  What this boils down to is helping people cope with the loan repayments that they need to make so that bad debt doesn’t pile up as folk feel unable to meet their debt obligations.

Meanwhile, more states are imposing travel and movement restrictions in order to curtail the spread of the virus. 13 of the 50 states are now imposing new regulations.

Politicians have yet to agree an aid package though, and that combined with some negative predictions about the prospects of the US economy were what investors appeared to be focusing on yesterday. The Dow Jones Industrial Average and S&P 500 both dropped by around 3.0%, while the tech-heavy Nasdaq limited its loss for the day to just 0.3%.

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UK

The lock-down is finally creeping its inevitable way across the UK and that was what dominated thoughts among investors. Stocks continued to fall with the FTSE 100 and FTSE 250 both closing 3.8% lower on the day.

Next and Primark have joined the likes of MacDonald’s and Caffe Nero in closing their shops. In a real bid for health and happiness, Nando’s has also closed its doors, so people will have to find their own overcooked, flavourless protein husks to cover with liquid spice in order to make it seem less like carpet and more like a foodstuff.

The reality of lower cash-flows continues to take its toll on companies. Various names have suspended dividend payments or stopped share buy-backs with publishing house Pearson among them.

This morning is looking more positive though, as futures are on the rise following the stimulus news coming from the US.

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Continental Europe

As with the UK, trading finished before the latest stimulus news was released in the US. So down went the Euro Stoxx 50, German DAX and whatnot by 2.1% or more on the day.

The Italian FTSE MIB posted a more modest 1.1% drop, but its previous massive losses have reflected it being the country with the most number of confirmed cases and victims of the virus.

This is a very sobering demonstration of the importance of following social spacing and lock-down guidelines. When these were initially imposed on Italians in the worst-hit northern region, there was a mass movement from north to south. As a result, the entire country is struggling to cope with infections.

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Elsewhere

Investors across the Asia Pacific region are rather more upbeat. They have been welcoming the Fed’s extended stimulus measures.

The Australian and Japanese benchmark stock indices closed 3.4% and 4.2% higher earlier this morning. In markets that open a little later, the numbers are also positive ranging from mainland China’s 2.7% gain to South Korea’s 8.6% rise.

South Korea’s rise has been further fuelled by the country’s actions combining major stimulus measures and movement restrictions.

Back in the Hubei province of China, the CENTRE NOT THE EPICENTRE of the original pandemic, contamination rates are falling sufficiently for the regional government to feel it can start relaxing travel restrictions. That’s sort of good news but paints a bleak picture for the rest of the world. It had cases in December (possibly earlier) and is now, three months later, beginning to relax travel restrictions. And that’s in a police state.

Sorry to be the bringer of nasty news, but that gives us all an idea of how long this thing will last until a cure or vaccine can be found, mass-produced, distributed and prescribed.

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WTF (What’s The Fact?)

Be prepared

Below is a Japanese folk hero who was prepared for any eventuality.

Imagine how you’d feel if you were being chased  down the street by him.

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Links

Investopedia – Loads of free explanations of financial terms including some helpful videos. Not 100% accurate, but a good starting point
Guffipedia – Lucy Kellaway of the FT has collected some painful examples of corporate people disappearing up their own analogies
Guardian – Free to access website with a couple of decent columnists (e.g. Nils Pratley and Larry Elliott)
Times of India – Why use five words when 37 will do?
Daily Mail – Click it. I dare you.

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Numbers

These are from around 8:15 this morning after UK and European markets opened.

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IMPORTANT
This is my opinion. Yes I read a lot and share what I’ve read with you, but this content remains my opinion. It’s NOT advice. If you take my advice – don’t take my advice. Any decisions you make about investments, your hairstyle or whether or not to eat marzipan are entirely at your own behest. If you are too stupid to recognise the devil’s ear wax when you see it, then you’re on your own.