Click here to view this email in your browser (mmmmaven.com/daily-market-update-dmu/)
Sign Up Here (mmmmaven.com/dmu-sign-up/) for Free to the DMU Email me to provide feedback
Contents Click on the links below to get to the stuff you really really want. USA – Stocks fell despite positive jobs data; Government issued 30-year bonds, yields rose (#USA) UK – Ex-dividend stocks and falling oil prices dragged indices down (#UK) Continental Europe – Oil and banks led modest overall declines (#Europe) Elsewhere – Stocks mixed as Chinese post disappointing macro-economic data (#Elsewhere) WTF – Bond auctions (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
————————————————————
USA
Stocks edged down in the US yesterday despite jobless numbers falling. The S&P 500 index has almost completely recovered its losses since the pandemic took hold, but there are still reasons to be cautious: the stimulus package isn’t through yet, a vaccine isn’t available yet, virus cases are still high in places… Same old same old really.
Tech stocks did OK yesterday but they weren’t enough to prevent the S&P 500 from nudging down by 0.2%.
Slightly more interesting stuff was happening in the world of bonds. The US government auctioned a load of 30-year Treasuries (US government bonds) yesterday (see WTF) and, in doing so, increased the supply of bonds in the market. When supply goes up sharply, prices tend to come down. So it was in the world of Treasuries with prices declining and yields rising. That was reflected in the benchmark 10-year Treasury’s yield jumping to almost 0.7% (up from the low of around 0.5% in early August).
This is classic bond market distortion, if you care to use the financial parlance. The government needs to borrow money, so it issues gazillions of bonds which push supply up. Meanwhile, the Federal Reserve is buying gazillions of bonds to support the financial system and that’s pushing demand up. You end up with a situation in which it’s hard to understand the fundamental drivers of bond yields from the investors’ perspective. Just thought I’d share that with you.
Back to Contents (#Contents)
————————————————————
UK
A bunch of stocks went ex-dividend yesterday (meaning that if you were to buy that stock yesterday, you’d no longer be entitled to the next dividend payment). That sent their prices down and pulled the indices along for the slide.
But there was also a general sense of concern that stock prices were vulnerable to more travel restrictions and US political nonsense.
Oil prices took a dive, pulling oil producers down with them, while financial organisations had a bad day as the general outlook for growth seemed to come into question.
The FTSE 100 and FTSE 250 closed 1.5% and 0.9% lower respectively.
Back to Contents (#Contents)
————————————————————
Continental Europe
It was oil and banks what dunnit across Continental Europe as well. BBVA, ING, BNP and Santander all dropped by between 2.0% and 2.8%, while oil majors like Eni, Enel and Total lost 1.3% or more.
That left the Euro Stoxx 50 and German DAX 0.6% and 0.5% lower respectively.
Back to Contents (#Contents)
————————————————————
Elsewhere
This news is going to prove unhelpful for western stocks: Retail sales in China unexpectedly fell in July compared to one year earlier while factory output recovered at a slower-than-expected pace.
China’s is the world’s second-largest economy, if it’s stumbling to recover, then so is the global economy. But Chinese stocks had a positive start to the day. I’ve no idea if that was due to government arm-twisting or more natural market forces. The rest of the region is more mixed.
Back to Contents (#Contents)
————————————————————
WTF (What’s The Fact?)
Bond auctions
The financial offices of governments in the likes of the US and the UK hold auctions when they want to sell a load of bonds. They sell bonds to raise money to pay for hospitals, nuclear weapons and the mistress in Mayfair, so it’s all essential stuff.
But bonds are tricky things to sell. You want to sell hundreds of millions-worth in one go, and you want to do so at the lowest coupon payment possible (the coupon is the interest payment that investors receive and bond issuers pay).
So you have an auction. That allows huge financial organisations such as pension funds, insurance companies and the like to say how many bonds they want to buy and at what price (which determines the coupon).
This is a simplified version of what happens, but it gives you the gist. The important point being that the demand and price are flexible. So it’s all a bit tense when a bond offering is put up for auction because there’s a fair amount of guesswork as to what the demand will be: the higher the coupon and lower the risk, the higher the demand.
Here’s a picture of a baby wombat during a sock auction.
Back to Contents (#Contents)
————————————————————
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.
Back to Contents (#Contents)
———————————————————— 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.
————————————————————
============================================================ Copyright © 2020 Chris Hurst, All rights reserved.
Want to change how you receive these emails? You can ** update your preferences (funnymoney.us4.list-manage.com/profile?u=09a51282c76deb2dc44653051&id=dcc3fa0043&e=f68b7163ab) or ** unsubscribe from this list (funnymoney.us4.list-manage.com/unsubscribe?u=09a51282c76deb2dc44653051&id=dcc3fa0043&e=f68b7163ab&c=e32daa2798) .