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Contents Click on the links below to get to the stuff you really really want. USA – Positive start on financial support hopes scuppered by rising virus cases; Powell warned of “no quick fix”; Stocks and bond yields closed lower (#USA) UK – Retail sales rise lifted spirits and stock prices; Financial support from government is sending public debt soaring (#UK) Continental Europe – Stocks up; Wirecard tanks some more (#Europe) Elsewhere – China bullying its way around Asia (#Elsewhere) WTF – Head over tail (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
Things started off with a positive feel on Friday as investors tried to focus on the potential for continued or increased financial support from governments and central banks. News that the Chinese had thrown a bone to the Americans in the form of increased purchases of US agricultural products as part of the preliminary trade deal between the two economic super-powers.
But towards the later part of the US trading day, concerns over rising numbers of Covid-19 cases punctured the optimism and stock prices fell. On top of that, Chairman of the Federal Reserve (US central bank), Jerome Powell, warned that “there would be no quick fix” to the virus and its ramifications. Meanwhile, there is a shortage of coins developing in the US (see WTF).
The S&P 500 closed 0.6% lower, while the tech-heavy Nasdaq Composite managed to close at much the same price that it started the day as tech stocks remained in favour. Gold prices rose as investors sought havens in which to park money. The demand for and prices of low-risk rated bonds increased again for the same reason. That sent the yield on the benchmark 10-year Treasury (US government bond) down to around 0.69% – it had jumped to around 0.9% during a bout of premature optimism in early June…but it was trading above 2.0% this time last year, so it’s all relative.
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UK
Investors across Europe were happily putting money into higher-risk rated investments, namely stocks, and trading closed before the latest updates came through notifying folk of more virus cases.
With this shrouded reality afoot, stock prices were pushed up with the FTSE 100 and FTSE 250 both closing around 1.0% higher on Friday. Basic materials (dominated by miners in the UK) led the gains as folk hoped for a return to more manufacturing and, therefore, consumption of minerals and the like.
Other positive news in the UK came in the form of better-than-expected retails sales figures. The numbers released by the Office for National Statistics showed signs that sales were beginning to bounce back up again in May with a 12% increase over the month following the record 18% slump in April. The general expectation for May had been a much more modest 5.7% increase.
But the reality is that sales are still massively down on where they were in February, hence a number of troubled retailers were finished off by the lockdown pressure.
Meanwhile, financial support being provided by the government has exceeded economic output for the first time since 1963 according to online broker ADVFN. Public sector net debt increased by £173 billion in May compared to one year earlier. Take my word for it, that’s a big debt burden that will present problems for plenty of governments yet to be elected.
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Continental Europe
Stocks across the continent were following much the same pattern as those of their UK counterparts, but without the extra fillip of higher retail sales. So the Euro Stoxx 50 and German DAX added 0.6% and 0.4% respectively. Technology and consumer staples led the gains while banks took another hammering.
In case you’re wondering, that seasoned entertainer, Wirecard, tanked by another 27% on Friday as folk seriously wondered what, if anything, could rescue the company in a feasible manner.
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Elsewhere
China’s diktats to silence people in Hong Kong and its skirmishes with Indian troops on the two Asian giants’ endless border set a sobering tone for stock trading this morning. The rise in virus cases didn’t help.
So stocks are noodling about, while investors try to find something positive to think about. They haven’t come up with much so far today.
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WTF (What’s The Fact?)
Head over tail
The US is running out of coins. The lockdown measures have throttled the movement of coins as mint workers are kept apart and banks aren’t depositing the usual tonnage of coins to the Federal Reserve each week.
What this means is that cash purchases are going to be messed up, which is a major problem for millions of Americans who don’t have bank accounts or primarily deal in cash.
The world has had coin shortages before, in the 15th and 18th century to name but two. Back then, coin trading was one of very few purchasing options so, in theory, it’s less of an issue now.
However, in 2018, the Fed reckoned there were 55 million Americans with insufficient or no banking facilities. They’re likely to be the less well off and, therefore, more reliant on cash and more sensitive to the loss of every cent. If change is unavailable in places where they shop, they’re in trouble.
Thankfully, this is something that falls to Jerome Powell to address. So sensible measures that involve photo opportunities with holy books or drinking bleach are much less likely to be invoked.
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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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