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Contents
Click on the links below to get to the stuff you really really want.
USA – Chinese production numbers lift stocks; Retail sales slump again; More restrictions on Huawei; Bonds steady
UK – Pound down; Miners, travel and leisure companies up; Retailers down
Continental Europe – Fall in German contagion rate lifts DAX
Elsewhere – Modest gains on stocks
WTF – Eurovision Song Contest
Links
Numbers
Ts & Cs
USA
Stocks were generally up on Friday as folk considered the combined effect of lockdown restrictions being eased and better-than-expected Chinese production numbers.
The latter provided a boost to global mining companies, sending the basic materials’ sectors of different national stock indices up. The S&P 500 was no exception, its basic materials sector added 0.8% on Friday while financials, oil & gas and utilities all succumbed to awful retail sales numbers for April.
US retail sales dropped by 16.4% in April, below the expected 10.7% decline and on top of the 8.3% fall in March.
On top of that, the US administration put more restrictions on Chinese tech company Huawei. It can no longer be allowed to provide some chips and the like. This won’t have helped US-China relations, but was largely hidden behind the bigger problem of the pandemic.
With all this going on, bond investors have pretty much held their ground in the US over the past couple of months. There was a steady increase in demand for lower-risk rated bonds a year ago, sending prices up and yields down (the two always move in opposite directions), before steadying out between October and December. This left the benchmark 10-year Treasury (US government bond) yield trading at around 1.75%. Then, as the pandemic hit, the yield plummeted to 0.541% and before steadying April to trade at around 0.644%.
So what? Well, it means that longer-term investors appear to have come to terms with what’s going on and are waiting for it all to play out, however long that takes.
This is in contrast to stock prices which continue to swing around fairly violently. Expect that to continue as rumours of a rebound in contagion vie with rumours of a vaccine.
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UK
The pound fell in value relative to the dollar and the euro as folk tried to work out what the future holds for the UK economy and decided that it might not be rosy.
Meanwhile, stocks were on the up, led by the positive production news from China and hopes that folk might be able to use travel and leisure companies again soon.
The FTSE 100 and FTSE 250 closed 1.0% and 1.7% higher respectively on Friday with miners such as Fresnillo, and travel and leisure companies such as Carnival and National Express up by 6.1%, 6.7% and 13.3% respectively.
Computercenter also jumped by 12.7% after posting a sharp increase in business thanks to people being stuck at home and trying to get their half-cocked work setups to function.
Retailers were still suffering though. WHSmith and M&S fell by 5.2% and 4.1% respectively as folk wondered how they would fare over the rest of the pandemic scenario.
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Continental Europe
A drop in the rate of infections in Germany enabled the German benchmark Dax stock index to closed 1.2% higher on Friday. The rest of the eurozone was less upbeat, being affected by the latest dire data releases and a ratcheting up of US-China tensions.
That left the geographically broad Euro Stoxx 50 up a more modest 0.4% of Friday.
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Elsewhere
Stocks are making modest gains across much of the Asia Pacific region this morning. The reopening of some businesses is leading the cautious optimism. China’s intention to revive large infrastructure projects provided a boost to the demand for and prices of industrial metals, which was further good news for miners.
Beyond that, contagion rates are lower than they were thanks to the lockdown restrictions, but those restrictions are being lifted, so everyone’s trying to guess how that’s going to work out.
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WTF (What’s The Fact?)
Eurovision song contest
Poor old Iceland. Their quirky, catchy and slightly sarcastic song should have swept the board on Saturday’s jamboree of formulaic pop music and intra-European one-upmanship.
Instead, the organisers put on a mash-up of socially responsible performances, some of which were pretty good. The worst part of the evening was listening to a endless slew of non-performing artists gushing about how much they love me.
While I can understand that sentiment (I am lovely), I’d rather they got to know me first before issuing this edict.
Ever the ironic combo though, the Eurovision programme ended with a British winning song (Shine a Light) sung by more or less everyone who has ever lifted a microphone and told me they love me.
As the host perhaps unintentionally said, the song was “the last British winner”. Note, not most recent, no. “Last”. Probably about right.
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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.
