Heightened tensions between the US and China are adding to existing worries but providing Trump with someone foreign to blame.
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Contents Click on the links below to get to the stuff you really really want. USA – Jobless numbers continue to rocket; PMI numbers still dire; US-China tensions rising; Stocks down (#USA) UK – US-China tensions and poor domestic data sink stocks (#UK) Continental Europe – Same (#Europe) Elsewhere – China announced a new national security law for Hong Kong; Stocks fall (#Elsewhere) WTF – A (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
The jobless numbers that come in every week are under far more scrutiny these days. The latest round showed that another 2.5 million people have been added to the list. This is a quarter-of-a-million lower than the previous week’s additional jobless, but still way above the 220,000 that had been the going rate before the pandemic.
The latest round of purchasing managers’ index data came in. As the title suggests, this provides an indication of what’s going to be bought or stored over the coming 30 days. Numbers above 50 indicated an industrial expansion, below 50 indicates contraction. The number is generally around 51, modestly positive. But not now. It’s “recovered” to 36.4 in May after having languished in the 20s in April. That makes May’s reading the second-worst in 11 years.
There were other miserable economic readings knocking about as well, but you get the idea. The mood was fairly downbeat if largely unsurprised by the numbers. Investors made mild adjustments to their hopes based on this, to leave the S&P 500 0.8% lower on the day.
The real concerns were in other arenas. Firstly, contagion numbers have picked up again in countries that were praised for their handling of the virus. Secondly, tensions between the US and China are continuing to mount, adding to the heap of problems that people already have to deal with.
The Senate passed a bill that could ban some Chinese companies from listing on US exchanges, Trump stuck his oar in and the Chinese, well, read the “Elsewhere” section below for their latest move.
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UK
US-China tensions and rotten domestic economic data sent stocks down in the UK. Export-focused stocks were more affected, and Whitbread slumped by 13.4% after announcing a rights issue (see WTF). Defensive stuff (shares that don’t rise or fall as quickly when everyone’s mood changes to positive or negative) were in favour as tends to happen in the downturns. That left some telecoms and utilities stocks higher while oil & gas, financial and mining stocks all had a tough time.
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Continental Europe
It was much the same story across Continental Europe. The Euro Stoxx 50 and German DAX both dropped by around 1.3% yesterday with a handful of defensive companies posting modest gains while everything else sank.
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Elsewhere
And here’s the big news for the day: China has announced a national security law for Hong Kong.
This will add to existing tensions between the world’s two biggest dick-tatorships, China and the US. The US has pledged to support Hong Kong (though one assumes that this will be through trade sanctions and will only have a temporary effect). The poor folk of Hong Kong were under a relatively benign dictatorship when the UK held sway there. Now they are being treated to the real thing with bookshops being shut or their owners being told to report who buys their wares.
It gave Trump something to point to that is worse than he, while the Chinese rolled out their usual nonsense about the need for security (presumably against people who read books to expand their knowledge, very dangerous).
Hong Kong’s Hang Seng inevitably led falls in stock indices across the region. It dropped by 5.4% while mainland Chinese stocks lost around 2.0% of value earlier today. Indian stocks also fell despite an unscheduled cut in interest rates by the country’s central bank. Taiwan, the island where the non-communist Chinese set up shop to escape Mao, merrily carried on producing microchips and thanked their lucky stars for the body of water between them and mainland China.
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WTF (What’s The Fact?)
Rights issue
This is where a company is in pretty desperate need of cash and decides to offer existing shareholders the right to buy more shares but at a cheaper price than they are currently available on the market. The existing shareholders either buy the new shares or get cash to compensate for the loss of value of existing shares.
Yes the existing shares slump because 1. there are far more shares in circulation all vying for a share in the company’s profits, 2. companies only do this when they’re desperate which makes investors proportionally nervous. Whitbread (the owner of naff restaurants and hotels such as Beefeater and Premier Inn) is suitably desperate as its entire business has been hammered by the lockdown.
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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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