View this email in your browser
Sign Up Here for Free to the DMU
Email me to provide feedback
Contents
Click on the links below to get to the stuff you really really want.
USA – Tumbling oil prices suggest deeper recession possible; Dollar up as NK’s Kim unwell
UK – Pound down, FTSE 100 up; FTSE 250 down; Oil and housebuilders slump; Bonds down on Italy problems
Continental Europe – Italy issuing more debt, could default or leave EU; Stocks higher on restrictions being eased
Elsewhere – Asia Pacific region nervous at North Korean situation
WTF – North Korea’s chief surgeon
Links
Numbers
Ts & Cs
USA
Tumbling oil prices gave some serious cause for concern in the US as they could indicate a deeper and more painful economic slump than had been hoped for. The S&P 500 closed 1.8% lower on the day with every industrial sector posting a drop and the 100 biggest falls being between 4.0% and 9.3% on the day, that’s chilling.
Currency traders were watching news about the North Korean equivalent of Donald Trump, namely Fat Boy Kim. Apparently the larder dictator of the giant prison that is North Korea might not be terribly well after cardiovascular surgery (see WTF). That led to folk worrying about instability in the region leaving them looking for perceived “havens” in to which they could put money. The US dollar is one such place, so up went its value.
The real news for the US comes later this week when purchasing managers index and jobless data are released. In the meantime, folk are trying to work out if things are going to get much worse before they get better.
Back to Contents
UK
Stocks in the UK delivered a mixed performance as investors awaited a bunch of economic and corporate data due out over the coming days. The value of the pound fell as the Covid-19 death-toll rose in the country, reflecting a greater sense of worry over the UK’s economic outlook. As we know and love, a lower value to the pound gives exporters a short-term boost to profits, so the export-dominated FTSE 100 posted a 0.4% gain on the day.
Oil stocks were absolutely trampled though. The price of a barrel of oil has fallen to, wait for it, $10. Yep, ten dollars for an entire barrel of oil (using the US standard price, namely West Texas Intermediate). That’s the lowest price since, blimey, I don’t know, since before Trump inherited his father’s millions I guess. It puts pressure on oil producers to cut production further. Even the Saudis will be scraping the… you get the idea.
The FTSE 250 provided a clearer reflection of overall sentiment. It closed 0.2% lower with house-builders having a tough time. Rightmove described its stats on properties coming to market and new asking prices were “not meaningful”. This is much like most conversations with estate agents but, for once, they’re having to be honest. Nothing is selling and they’re really struggling. I’m trying to feel sorry for them, but it’s a struggle.
Now here’s a thing. The demand for and prices of bonds went down yesterday. With a greater sense of risk in the air, you’d be forgiven for expecting a higher demand for low-risk stuff such as government bonds but, no, the price of benchmark 10-year Gilts (government bonds) went down, sending the yields up a little. This might be a knock-on effect of expectations that Italy is going to have to issue more bonds; higher supply means lower prices.
Back to Contents
Continental Europe
We need to talk about Italy. It’s buggered. The government can’t agree on a package to sort itself out because the government is split and under enormous pressure from the opposition not to be sensible. The country is in deep water following the lockdown because it has loads of bonds in issue, and those bonds demand interest payments and capital to be returned. That money is thin on the ground in Italy. If the country had delivered on its fairytale growth forecasts, then things might not have been so bad. But then, if I had the brains of Gary Kasparov and the looks of George Clooney, I’d probably take ages to make a really bad cup of coffee. In the meantime, Italy is having to issue loads more bonds in order to prop up the daily lives of people and businesses.
The point being that Italy is now a material threat to the stability of the European Union (in my humble opinion). It could default on bond payments or might make a dash for the exit in order to revert to the lira and wipe a bunch of value off its outstanding debt as a result. This lot might create a smoke screen for pro-Brexit operators to push a speedy exit for the UK through. That would be a needless and painful mistake. Bojo has won a massive majority and, with it, time to negotiate a semi-decent deal especially now that the EU is weaker as a result of Italy’s stupidity. The smart thing to do would be to use the time and the opportunity to negotiate. I have a nasty feeling that that won’t happen and that Bojo and co will push Brexit through and blame all the fallout on Covid-19.
In other news, stocks closed higher across much of the continent. The Euro Stoxx 50 and German DAX added 0.7% and 0.5%. Oil-related stocks were down again, but everything was on the up and folk focused on the lifting of some lockdown measures. The challenge is to manage the process without allowing a second wave of contagion, as has happened in Singapore where the virus had seemingly been under control.
Back to Contents
Elsewhere
News that North Korea’s dictator might die has created regional uncertainty as no one knows who or what would follow his demise. That uncertainty has combined with reality kicking in over the Covid-19 implications to send stocks across the Asia Pacific region down. Australian and Indian stocks have been among the biggest fallers.
Back to Contents
WTF (What’s The Fact?)
North Korea’s chief surgeon
North Korea’s Chief Surgeon, Well-hung Wang, has confirmed that the country’s great leader, Kim Jong-un, has survived cardiovascular surgery. According to Wang, the surgery was a success: “We have removed a couple of red fleshy things using only the cleanest kitchen utensils. Long live our great leader. Got to go now, there’s a couple of state security chaps who seem to want a quick chat.”
Back to Contents
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.
Back to Contents
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.
