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Contents Click on the links below to get to the stuff you really really want. USA – Virus cases rising as economic pressure bites; Banking regulations eased; Stocks recover some losses (#USA) UK – Brexit worries drag pound down; FTSE 100 nudges up (#UK) Continental Europe – ECB intervenes to reassure investors; Automakers join banks on gains (#Europe) Elsewhere – Not a positive week (#Elsewhere) WTF – Hindsight (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
It looks as though the US (and other countries) could be facing a stark choice: reinstate lockdown measures or watch as more people are hit by the virus.
The virus numbers are rising again in certain parts of the US, but the economic data coming in emphasise the pain being caused by lockdown measures. The trouble is, that’s the only treatment we have at the moment.
The latest round of data came in worse than expected. Initial unemployment claims were expected to drop to 1.25 million, they nudged down to 1.48 million. Beneath this headline number were some brutal regional details: initial unemployment claims were up 7.6% in Pennsylvania, but rocketed 31.8% in Arizona. And the US trade deficit widened by 5.1% in May instead of narrowing as had been expected (deficit = importing more than exporting and therefore sending money out of the country on balance).
That’s the background but investors have been jumping on any opportunity to avoid missing out on gains in asset prices. When those prices fall, as they did yesterday, investors subsequently pile in to try to buy in the dip (i.e. when the assets are “cheap”).
So up went the S&P 500 by 1.1% on the day – only partially making up for Wednesday’s losses. Banking stocks led gains after US authorities eased the rules under which banks operate to make it less difficult for them to turn a profit. Meanwhile the more defensive stuff (that had fallen less previously) lagged.
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UK
Banks were leading gains elsewhere as the world’s stocks continued to move in unison.
The pound was weaker against the dollar which helped to lift the FTSE 100 by 0.4% on the day, while the more domestically focused FTSE 250 dropped by 0.2%.
Brexit concerns are coming back to the fore as the deadline for an extension looms (end of June). With economic turbulence already wreaking havoc, the UK economy could really do with a smooth transition. Here’s hoping.
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Continental Europe
The European Central Bank intervened in daily transactions of currency yesterday (aren’t those just the sexiest words you’re going to hear all day?) The ECB made sure that there were plenty of euros to go around which reassured investors that liquidity (availability of money) would be maintained – the lack of it panics folk for pretty obvious reasons.
Auto makers joined banks as the highest risers on the markets in Continental Europe yesterday. That was sufficient to pull both the Euro Stoxx 50 and the German DAX up by 0.7% on the day.
Once again, we’re seeing the pattern of a sharp fall following by the steady clawing back of losses.
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Elsewhere
It’s probably not going to be a positive week for stock moves across the Asia Pacific region despite a decent Friday for Japanese and Australian stocks. South Korean and Indian stocks have declined while Chinese stocks have been on the sidelines while folk there take part in the dragon boat festival.
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WTF (What’s The Fact?)
Hindsight
Bloomberg produces an outlook magazine at the end of the year. I still have the one from December 2019, and it’s not as far off as you might expect bearing in mind the unexpected nature of 2020’s primary event – the virus.
“Worldwide, growth is slackening and risks are rising. Most major economies will slow next year, and some will slip into recession.”
This contrasts with the slow but steady growth envisaged by a fairly sizable number of commentators. The numbers they predicted have been shot to bits by the virus (only the UK was predicted to be in recession from among the named countries while the US was assigned more than 2.0% growth).
One wish did come true: central banks had been pressing governments to take more of a lead with financial stimulus as the banks themselves were running out of ammunition. Well, with trillions of dollars being pumped into the global economy by governments, that has come to pass.
And maybe, just maybe, governments will pay more head to their central bank governors – particularly Jerome Powell who has conducted himself with calm, data-based consistency. He’s proven to be right on resisting political pressure to waste stimulus and only use it when necessary. We’re all mighty lucky to have him at the helm of the US Federal Reserve.
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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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