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Contents
Click on the links below to get to the stuff you really really want.
USA – Stocks battered after oil price collapse; S&P 500 down 3.1%; Mineral prices down; Bond yields down
UK – As US; Parliament will host a largely virtual PMQ today
Continental Europe – German sentiment not as bad as expected, but who cares? Stocks down; Italian bond yields rocket
Elsewhere – Stocks recovering this morning
WTF – Privilege
Links
Numbers
Ts & Cs
USA
Stocks took another battering yesterday as investors reacted to oil prices collapsing. During trading, oil prices dipped below $0. Yep, they were literally giving the stuff away (the US stuff at least which is a different grade from the European stuff). This happened because all the storage facilities are full and no one is buying much. So if you’re an oil producer, do you halt production and close your facility which costs money anyway, or do you temporarily give the stuff away and try to persuade the government to open storage facilities while bleating about the pain of the lockdown? With the blonde president in charge, this sort of approach not only opens storage capacity (largely in the president’s head) but also has the blonde president scrambling to lift the lockdown regardless of the revival of contagion that could ensue.
Back to the stocks though where the S&P 500 tanked by 3.1% on the day. Mineral prices are also down due to much lower demand, so mining companies followed their oil brethren down. Bonds moved accordingly as well with demand for them and their relatively low-risk environment rising. That sent prices up and yields down on the benchmark 10-year Treasuries (US government bonds), but not much a great deal.
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UK
UK stocks pretty much followed the US lead yesterday with the FTSE 100 and FTSE 250 sinking by 3.0% and 2.7% respectively. Astonishingly low oil prices and renewed worries over global demand sent everything lower. Basic materials (miners) took a hammering on the FTSE 100 as investors weighed the possibility of a longer-than-hoped-for recession, while oil-related companies got soundly thumped.
As you’d expect in these circumstances, the demand for and prices of lower-risk rated bonds increased because folk were putting more money into them to escape a higher level of carnage elsewhere. That sent the yield on the benchmark 10-year Gilt (UK government bond) down (price up = yield down on a bond), but not by much compared to violent swings of recent weeks.
Today in parliament will be fun. Dominic Raab will be standing in for Bojo and, for the first time in years, the government will be facing an electable and widely respected opposition leader. We’ll get an indication of how effective Kier Starmer is today, but with most MPs tuning in through Zoom, and with a war-like environment that ought to encourage a more co-operative approach, the opportunities for the usual rough and tumble will be severely limited.
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Continental Europe
Much the same on the continent as well. The Euro Stoxx 50 and German DAX both slumped by around 4.0% as folk fretted about oil prices and the implications for global growth (or the lack thereof). This was despite data indicating that German economic sentiment was not as bad as had been expected. But what’s sentiment got to do with it when everything’s closed and oil producers are giving the black stuff away?
The one other point that caught my eye was the slumping demand for and prices of Italian bonds. The country was already precariously placed before the crisis, but now it’s in deep do-do. Maintaining interest and capital payments on bonds has become more difficult just as the country’s government issues more bonds to fund the programme of supporting businesses and household. This has sent the prices down far enough to send yields up (price and yield of a bond always move in opposite directions) to where they were before the European Central Bank stepped in with a load of financial support.
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Elsewhere
Having puked out the oil-related fears, folk seem to be feeling much better this morning. Stocks across much of the Asia Pacific region are modestly higher with the notable exception of Japan. The Nikkei 400 closed 0.6% lower this morning as the country focused on the acceleration of virus cases after a relatively controlled few weeks. The country was a little slow in successfully imposing a lockdown and appears to be paying the price for that now.
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WTF (What’s The Fact?)
Privilege
This from Stephen Colbert on his Comedy Central show,
“Donald Trump is so privileged that the first job he ever had to apply for was president of the United States.”
And, by the way, he came second in that race.
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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.
