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Contents
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USA – Investors ignore awful economic data from China; Gilead Services’ prototype treatment more in focus; Boeing to resume some production; Bonds steady; Oil prices slump
UK – Stocks up solidly on Friday and early trading this morning (see table below) Bond investors unmoved
Continental Europe – As UK
Elsewhere – Less gung-ho; Australian stocks slump
WTF – Trump of the tropics
Links
Numbers
Ts & Cs
USA
There was quite a bit going on towards the end of last week. China published terrible (and therefore possibly honest) economic data. An embryonic treatment for the most severe cases of Covid-19 was being developed in the US and US oil prices took another dive.
China’s economy shrank for the first time since 1992 when records began. The world’s second-largest economy declined by 6.8% over the first three months of 2020. That is in stark contrast to the official 6.0% growth posted in the last three months of 2019. It would appear that even President Xi Jinping knows when a big fat porker is only go to lead to derision and further distrust, so the truth (more or less) was provided.
Despite this cold shower of numbers, investors have been on a hair-trigger for anything positive so that they don’t miss out on gains. The news that Gilead Sciences had a prototype treatment for the more severe cases of Covid-19. The company itself was pretty circumspect, but investors are itching for positive news and fully aware that there might never have been a time when so much global resource was poured into the combating of a single ailment.
The positive news was added to by Boeing announcing that it would resume production in Washington state. The trick now is to get things up and running while keeping the virus under control.
Meanwhile, oil prices slumped again. They reached 18-year lows as folk rolled their eyes at more nonsense from Trump and focused on the fact that demand from China has plummeted while storage facilities across the US are at or near full capacity. Reuters is quoting the latest Baker Hughes numbers showing that oil rigs have been put out of action at the fastest rate for five years. So if you know the right people, you can pick up a barrel of West Texas Intermediate oil for $15. That’s quite a drop (ho ho) compared to the $140-odd you’d have paid in June 2008. Oil producers might have to start paying folk to take oil. That’s why there’s so much pressure on Trump from industrialists to end the lockdown. It’s costing them a fortune. He’s dumb enough to accede to their demands. If it weren’t for those pesky virus victims and those interfering voters…
With all the conflicting news going on, bond investors remained relatively unmoved. They want to see a clear indication of what’s coming next before selling bonds and moving into higher-risk rated stuff. So the yields on the benchmark 10-year Treasury (US government bond) remained steady at around 0.64%.
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UK
UK stocks posted solid gains on Friday with the FTSE 100 and FTSE 250 adding 2.8% and 3.1% respectively. It’s all about the potential for a Covid-19 medical treatment, which is still a while away, but folk are trying to jump on board for any potential recovery. Most sectors posted gains on both indices with Whitbread, Carnival and InterContinental Hotels all continuing to show signs of recovery after being battered by the fall-out from the virus.
But, much like their US counterparts, bond investors weren’t so easily persuaded. They’ve seen what’s happened in Singapore where lockdown restrictions were being lifted, only to trigger a rise in contagion once again. So the demand for and prices of bonds stayed fair stable, leaving the yield on the benchmark 10-year Gilt (UK government bond) at around 0.30%.
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Continental Europe
Gains were similarly solid across the continent. The Euro Stoxx 50 and German DAX added 2.7% and 3.1% respectively. Travel and leisure stocks, which have suffered the most during the downturn, gained the most on Friday. They were joined by auto manufacturers and related companies which had been having a tough time as exports dried up.
The demand for and prices of lower-risk rated bonds remained steady as the more sanguine bond investment community appeared to need rather more persuasive data before abandoning their havens. That left the yield on the benchmark 10-year Bund (German government bond) steady at around -0.47%.
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Elsewhere
Investors across the Asia Pacific region are rather less gung-ho this morning. Australian stocks took the worst of it after sentiment turned sour in the last hour of trading over there earlier this morning to leave the S&P/ASX 200 2.5% lower. The rest of the region is more mixed with major national indices in Japan, South Korea and Taiwan modestly down, while the others are slightly up. It’s a foggy outlook at the moment. Everyone is hoping but no one is certain.
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WTF (What’s The Fact?)
Trump of the tropics
That’s the moniker being given to Brazil’s President Jair Bolsonaro. And here’s why:
“I wouldn’t rape you because you don’t deserve it”. Specifically, the journalist in question was “ugly” and not “his type”.
Black activists are described by Trumpsonaro as “animals” that should “go back to the zoo”.
And he “would be incapable of loving a homosexual son”. He would prefer his son to “die in an accident than show up with a moustachioed man”.
Trump will need to keep coming up with pearls to keep America first in this contest.
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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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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.
