View this email in your browser
Sign Up Here for Free to the DMU
Email me to provide feedback
Click on the links below to get to the stuff you really really want.
USA – Washington takes aim at China in election year; Healthcare and oil-related stocks up; Most of rest down; Treasury yields inch upwards
UK – Falling pound reduces falls on FTSE 100; FTSE 250 falls more
Continental Europe – American rhetoric unnerved investors despite falling death rates from virus; Bloc awaits German court decision on supporting ECB and, therefore, Italy
Elsewhere – Stocks up in Australia and Hong Kong
WTF – Your Help Please
Ts & Cs
Stock price moves have been mixed over the past 24 hours as folk weigh the economic positives of lockdown restrictions being eased against the river of depressing economic data flowing in and the risk of a second wave of contagion.
California was the first US state to shutdown its economy in the face of Covid-19. It is set to start loosening restrictions on Friday after contagion numbers there appear to be coming down from a double-peak.
But the real news is, once again, Trump. He and his lackeys have taken aim at China. He might be absolutely right. They might have cocked up at a laboratory and allowed the virus to slip out. But making such a public show of disdain only serves one purpose: it’s election year and Trump needs a distraction from the virus, lockdown and economic misery in the form of a common enemy right now, and those Chinese people do look and sound frightfully different don’t they? So they’ll do nicely.
Further trade restrictions are looming which could put the mockers on a relatively quick recovery after the virus and oil price troubles. This took its toll more on stocks outside the US, but domestic ones weren’t entirely immune. The S&P 500 nudged up by 0.4% while the tech-heavy Nasdaq Composite rose by 1.2% yesterday. Had the trade war fears not been re-stoked, the numbers might well have been better with oil & gas companies rising on the back of recovering oil prices.
Bond investors seemed to react. The demand for and price of the benchmark 10-year Treasury (US government bond) dropped a little, suggesting that bond investors can see some light at the end of the cliche (they’re moving money out of the low-risk investment and perceived “haven” that is Treasuries). But the yields (which have risen – the price and yield of a bond always move in opposite directions) aren’t so much “up” as “less down”, as they’re trading at around 0.67%, only just up from the March low of 0.54% and several stratospheres below the 2.49% of this time last year (reflecting the much less risky environment back then).
Back to Contents
FTSE 100 and FTSE 250 closed 0.2% and 1.2% lower respectively. Healthcare and oil-related stocks posted gains as folk hope for an effective treatment of the virus to be churned out by pharmaceutical companies, while oil prices are slowly recovering from an almighty battering.
The value of the pound continued to drop, taking some of the edge off price drops for the FTSE 100 (dominated by exporters, so a lower value to the pound is helpful to them), but the reason for the falling value of the pound is that investors are worried about the outlook for the UK economy. The less faith you have in a country’s future, the less you invest in that country and, therefore, the less of that country’s currency you need.
Over in the more domestically focused FTSE 250 (companies 101 through 350), the fall was more pronounced for two reasons. Firstly, its constituent companies don’t benefit as much from a fall in the value of the pound. Secondly, its healthcare and oil & gas sectors make up a much smaller proportion of the overall index, so gains in those sectors yesterday had less effect on the overall performance of the FTSE 250.
Back to Contents
Investors in Continental Europe were trying not to think too much about the rhetoric coming out of Washington, but rather on the falling death rates in France, Spain and Italy. It didn’t work. The Euro Stoxx 50 and German DAX closed 3.8% and 3.6% lower respectively with every sector of both indices posting sizeable losses.
There are plenty of exporters in both indices, and they are smacking their heads against various hard surfaces as Washington does its best to ensure that the global economy can’t get back on its feet too soon which is very bad news if, like the Germans, China accounts for a chunky proportion of your sales.
And talking of the Germans, they are considering ending financial support for the European Central Bank’s buying of bonds. This is the process that central banks use to inject cash into the system. It also has the effect of pushing bond prices up and their yields down which, in turn, helps to keep borrowing costs for companies and countries low.
In the EU, there’s another factor: Italy. The Italians have been merrily buggering up their economy for years, not least because of the dodgy old orange pervert, billionaire and former Prime Minster, Berlusconi (he put Italy first). But it’s deeper than that (most things are deeper than Berlusconi). The country is split between the prosperous north and the financially precarious south. The two regions only came together within the past 150 years, and the cultural rift has never really closed. As the south depends on the north’s finances, so too does Italy now, in this time of great vulnerability, depend on the finances of the European Union. And who is the biggest benefactor of the EU? Germany.
If Germany pulls the plug on supporting its neighbours, the demand for Italian bonds could well plummet. That would send their prices down and their yields rocketing (the price and yield of a bond always move in opposite directions). That would crush the value of the pensions held by Italians and make the Italian government’s finances as stable as Berlusconi’s trousers. That level of instability would have a knock-on effect across the EU and, potentially, could be the beginning of the end of the European project. So keep an eye out for the German court decision later today.
Back to Contents
Large swathes of the Asia Pacific region are still having a public holiday, but things were ticking away in Australia and Hong Kong. In both instances I can see that stock prices have risen this morning. Australia’s central bank kept its interest rate and other policies on hold, which didn’t seem to surprise anyone. Rising oil prices and the prospects of a looser lockdown scenario lifted sentiment, sending stocks up. We shall see what happens when the other markets re-open and if Washington follows through on its trade threats.
Back to Contents
WTF (What’s The Fact?)
Your help please
I was speaking to a wise man (albeit with a bad haircut and a dangerously small nose) over the weekend. And he was counselling the need, among other things, to improve the design of this here daily missive.
I’ve been looking at newsletters produced by other, almost as reputable sources as this one (international organisations and the like) and have generally seen a fairly text-heavy, simple layout.
What would you like me to do with the design of this?
– Different font?
– Break up text with images? (there are time restrictions on this, so it would probably be mostly fixed images as opposed to relevant ones for each day’s stories)
– A different layout?
– Adopt the style of your favourite blog/ newsletter, namely…?
Please let me know.
Back to Contents
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
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.