Those data just keep coming in and stifling the hope that investors are trying to stoke.
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Contents Click on the links below to get to the stuff you really really want. USA – Vaccine hopes recede; Stocks down; Policymakers try to reassure (#USA) UK – Christmas trees and fridges will be tariff-free; Pound up, FTSE 100 down; Unemployment rockets (#UK) Continental Europe – €550 bn support package not popular and not enough; Spanish and Italian stocks down (#Europe) Elsewhere – Stocks generally up (#Elsewhere) WTF – Summer of optimism (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
Yeah, about that vaccine that everyone got really excited about on Monday… well, turns out that it’s going to take many months of testing before it can be wheeled out as the vaccine. So everyone made the same noise that you hear just after an Englishman has taken a penalty in a football tournament, and down went stocks.
The S&P 500 closed 1.0% lower with every industrial sector posting a fall, oil & gas registering the biggest declines despite the price of a barrel of West Texas Intermediate having climbed back up to $32.
Meanwhile, Treasury Secretary Steve Mnuchin and Federal Reserve Chairman Jerome Powell were trying to be realistic while also supportive in their comments to a Senate committee. The background of rising tensions between the US and China were not helpful though, or were the 30% drops in both housing activity and new work permits.
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UK
In the UK, the focus was shifting back to that old chestnut, Brexit. The UK government has started to release the odd clue about its post-EU trade terms. Fridges and Christmas trees will be tariff-free. The fact that some info is coming through, albeit piecemeal and carefully (?) selected, supported the summer of optimism (see WTF) that we seem to be enduring.
The pound rose following hopes that there might be some clarity for the UK’s Post-Brexit future. And that was, of course, bad for export-focused companies which dominate the FTSE 100. That’s why the blue-chip index closed 0.8% lower while the more domestically focused FTSE 250 (companies from 101 through 350) added 0.6%. Defensive stocks such as utilities and consumer staples were down while travel and leisure stocks managed to post gains.
In broader economic news, the unemployment rate in the UK shot up in April. It reached a 24-year high of 2.1 million after an extra 856,500 jobless claims were added, the biggest one-month rise since records began in 1971 according to brokerage ADVFN. The overall unemployment rate for the country could be heading to 9%. That’s going to test the ability of the economy to bounce back quickly.
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Continental Europe
The problem on the continent was how to deal with the sort of stats that I’ve just mentioned. France and Germany have proposed a €550 billion reconstruction fund paid for by new debt (in the form of bonds) taken on by the EU as a whole. What this means in reality is the states in decent nick (northern European countries such as Austria, Denmark, Netherlands and Sweden) paying to bail out the states in trouble (“peripheral” states such as Italy, Portugal and Greece). Funnily enough, the northern countries are against the idea.
It’s a crux political moment for the European Union. France and Germany appear to be pushing towards a closer financial union so that everyone reaps the consequences of poor financial behaviour and the benefits of prudence, while divesting a degree of sovereignty. In the meantime, even if the financial package is given the go-ahead, it could be too little too late. Contrast it with the trillions that the US and Japan are pumping into their respective economies and the £330 billion that the UK is stumping up for its own economic repair. In that context, €500 billion for an economic zone that is not much smaller than that of the US seems paltry.
Stock price moves reflected the levels of nervousness in different countries: The German DAX nudged up by 0.1%, while the Spanish and Italian benchmark stock indices dropped by more than 2.0%. This led Christine Lagarde, the Anna Wintour of the European Central Bank, to announce that the ECB would be quick to support the likes of Spain and Italy if appropriate. This was timely as Spain’s debt-to-GDP ratio (how much debt in proportion to one year’s worth of the national economic output) was up to 98.3% and is on course to hit 115% this year.
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Elsewhere
Most major benchmark stock indices across the Asia Pacific region are up this morning. The onus seems to be on hopes of someone coming up with a vaccine through intense testing as quickly as possible (notwithstanding the need to allow the vaccine to take its course and provide side-effects). But it all smacks of hope rather than expectation at the moment.
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WTF (What’s The Fact?)
Summer of optimism
The hopes that a treatment for Covid-19 will be found enabling everyone to go back to work.
OR
An annual phenomenon in the UK that there will be four, as opposed to two seasons.
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Links
Investopedia (www.investopedia.com/dictionary/) – Loads of free explanations of financial terms including some helpful videos. Not 100% accurate, but a good starting point Guffipedia (ig.ft.com/sites/guffipedia/) – Lucy Kellaway of the FT has collected some painful examples of corporate people disappearing up their own analogies Guardian (www.theguardian.com) – Free to access website with a couple of decent columnists (e.g. Nils Pratley and Larry Elliott) Times of India (timesofindia.indiatimes.com) – Why use five words when 37 will do? Daily Mail (www.theatlantic.com/magazine/archive/2016/07/the-war-on-stupid-people/485618) – 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.
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