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Contents
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USA – Stocks close higher after turbulent day; Vaccine whistleblower warns of bleak winter; Jobless numbers increase more slowly; Demand for bonds remains strong
UK – Most currencies falling including pound; Dire economic data and contagion worries drag stocks down
Continental Europe – Stocks down; Inflation in Germany and Spain down; Novartis chief warns that vaccine could take 2 years
Elsewhere – Investors largely ignore better-than-expected Chinese industrial numbers
WTF – A
Links
Numbers
Ts & Cs
USA
After an erratic day of trading, US stocks closed the day up. Investors are trying to balance the sombre news about economic data and US-China relations, with speculation about how soon lockdown restrictions could or should be lifted.
Much of the day was dominated by negative thoughts with Trump sitting in the corner refusing to play with his pals from China saying they were all poo-poo-heads. Add to that the latest comments from the US administration’s recently fired vaccine expert warning of a very bleak winter if the government doesn’t improve its approach to the virus. Rick Bright was fired after resisting Trump’s attempt to push untested virus treatments.
But, as the day wore on, the mood improved. Jobless numbers started to show signs of getting worse at a slower rate (anything is taken as good news in this environment) and someone appeared to be buying a heck of a lot of banking stocks. That left the S&P 500 1.2% higher by the close of trading.
The demand for bonds remained strong (see WTF). As a result the price of the benchmark 10-year Treasury (US gov’t bond) is very high and its yield is returning towards the record lows recorded in March.
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UK
Most currencies are falling in value as various governments and central banks lower interest rates and effectively print new money to tide the system over until the virus goes away. The pound is among those being pushed down, but with others going down as well the relative effect for imports and exports is muted.
The general mood across virtual trading floors in the UK yesterday was negative. All sectors in both the FTSE 100 and FTSE 250 closed lower as folk looked as though they could no longer ignore the reality of dire economic numbers and the potential of a second wave of virus contagion. The respective indices closed 2.8% and 3.0% lower on the day.
Basic materials were least affected as they’d already fallen plenty earlier in the week. It was utilities and tech that were suffering the most as different sectors take turns to make the biggest moves.
IT company Sage and travel company Stagecoach were further hit by broker downgrades, but 3i closed more than 7.0% higher after delivering better-than-expected results.
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Continental Europe
Stocks were similarly down on the continent. The Euro Stoxx 50 and German DAX dropped by 1.8% and 2.0% respectively. Telecoms companies had a fairly positive day, but pretty much everything else was down, led by consumer goods and services companies.
Inflation numbers came in from Spain and Germany and were predictably lower. The spods doing the calculation on these numbers had to make some assumptions in the wake of so much virus-related disruption, but no one seems terribly concerned at the moment because we all know the gist anyway.
And if you were in any doubt, Novartis chief, Vasant Narasimhan said that a vaccine could take two years to develop and distribute. It should be noted, though, that Novartis sold its vaccine business to Glaxo in 2015. But Narasimhan is unlikely to want to score points at this time, so his words do carry weight.
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Elsewhere
Better-than-expected industrial output numbers from China didn’t seem to make a huge impression on investors this morning. The recovery might be progressing well enough in China, but their data are semi-fictitious, so we’ll have to wait and see if traders would be right in thinking that the demand for minerals such as copper could get a boost.
In the meantime, stocks in Japan and Australia were up after a torrid week, while much of the rest of the Asia Pacific region’s stocks are trading slightly lower than the prices at which they started the day.
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WTF (What’s The Fact?)
The bond phenomenon
As various governments and central banks keep interest rates low and pour loads of money into their respective quarters of the financial system, the availability of money is immense. With loads of cheap money available, banks can’t charge much to lend or pay much on savings.
So bonds are moderately attractive at the moment because they tend to offer a fixed payment. It’s a cloudy situation because governments are issuing trillions of dollars-worth of bonds to pay for their lockdown support measures, and central banks are buying them with newly “printed” money. That creates a bizarre circus, but provides money for those who need it.
But while folk are sufficiently worried about the alternative being very risky indeed, they’re going to park money in relatively low-risk rated bonds until things become clearer. And that’s what’s keeping the demand for and prices of bonds high and their yields incredibly low.
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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.
