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Contents Click on the links below to get to the stuff you really really want. USA – Tensions with China and high virus numbers compounded by rising jobless claims and tech bubble worries; Stocks and bond yields down (#USA) UK – Most stocks down; Retailers up on rising sales (#UK) Continental Europe – German exporters and tech stocks worst hit (#Europe) Elsewhere – Modest rises this morning across Asia Pacific (#Elsewhere) WTF – All bar none (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
Familiar factors were driving US investor sentiment on Friday: rising virus cases and tensions with China. The US has had more than 4 million Covid-19 confirmed cases and 144,305 deaths according to John Hopkins University. This is putting some healthcare providers under intense pressure; Louisiana Governor Jonathan Bel Edwards has stated that the state’s healthcare system is approaching breaking point, ADVFN reports.
The unexpected rise in jobless claims didn’t help the mood, but the big factor at the moment is the tensions with China. The closure of the Chinese consulate in Houston led to a tit-for-tat closure of a US consulate in China. This is bad news for everyone. The world’s two largest economies having handbags at dawn just when we’re all trying to cope with a pandemic is, shall we say, suboptimal.
With lockdown restrictions being lifted, there were some signs of economic recovery on the domestic US front though. Business activity and sales of new homes both increased. But they didn’t surprise anyone, so they didn’t make much difference to share prices.
There was also another worry. Technology stock prices have been rising and rising to the point that there are concerns of another tech bubble (akin to the dot-com bubble of 20 years ago). That undermined the value of the big tech shares that have been propelling the Nasdaq Composite to ever-higher records. So down went Amazon, Alphabet (Google), Apple, Netflix, PayPay, eBay and Tesla.
That left the tech-heavy Nasdaq Composite 0.9% lower while the more mixed S&P 500 was only 0.6% lower. The demand for and prices of lower-risk rated bonds also increased. The yield on the benchmark 10-year Treasury (US government bond) is now down to 0.574% after having spent three months bubbling around between 0.6% and 0.7%.
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UK
The factors laid out in the US section took their toll on UK stocks on Friday. The FTSE 100 and FTSE 250 both closed around 1.3% lower on the day. The majority of stocks fell in value as the potential to undermine the recovery was provided by Sino-US tensions.
There was some good news for UK retailers though. Retail sales rose 13.9% compared to one month earlier, way ahead of the expected 8% rise. The purchasing managers’ index for services (30 day outlook) was also positive. The latest reading came in at 56.6, way above the 50-mark that delineates expected growth from expected contraction.
The main effect of these data was to propel retailers upwards. Tesco and Morrisons closed 2.2% and 1.8% higher respectively, putting them at the top of the FTSE 100’s movers on Friday. The reality of international trade being undermined took its toll on many companies though, with M&G, Vodafone and IAG (British Airways) slumping by 4.8% or more on the day.
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Continental Europe
Much the same as the UK once again. German exporters got the worst of it though, leaving every company listed on the German DAX lower on the day. The overall drop for the German benchmark index was 2.0%, while the geographically broader Euro Stoxx 50 lost 1.8%.
Tech stocks were also battered by the falls that their US counterparts sustained, leaving SAP and Infineon Tech both down by 4.0%.
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Elsewhere
Stocks across the Asia Pacific region have got off to a modestly positive start this morning. Hopes of more financial stimulus from central banks and governments appear to be behind the rises. The exception is in Taiwan where the microchip manufacturer, TSML, surged by 10% after US rival, Intel, reported a delay to delivery of new chips.
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WTF (What’s The Fact?)
All bar none
Students will be returning to university over the coming weeks and months. But they’ll have to wear masks, and the student union bar will not be open.
This is a devastating blow for our future leaders. Instead, they’ll have to occupy themselves in other ways: – Sleep – Daytime TV – Collecting Klimt and Monet posters – Sleep – Arguing over the utilities bill – Inventing new toast-based recipes – Sleep – If all else fails, if no other options remain, they might study. But they’ll probably sleep on it.
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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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