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Contents Click on the links below to get to the stuff you really really want. USA – Fed underwhelms investors with latest announcement; Stocks down, dollar up; Macro data positive on balance (#USA) UK – Lower than expected inflation pushes pound up, FTSE 100 down; Rolls Royce and Morrisons fall sharply on company news (#UK) Continental Europe – Zara owner, Inditex, jumped 8.1% on Q2 results (#Europe) Elsewhere – Bank of Japan leaves monetary policy unchanged; Falling iron ore prices sink Australian miners (#Elsewhere) WTF – The champions (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
The Federal Open Market Committee (FOMC, equivalent of the Bank of England’s Monetary Policy Committee) had its last meeting before the US election in November. These are the folk who set interest rates and determine how much quantitative easing (QE) is to be applied (i.e. electronically “printing” cash by buying gazillions of bonds).
Well, yesterday’s FOMC meeting turned out to be a bit meh. The low interest rates and existing bond-buying programmes continue, and they have been limiting the economic slowdown and helping to propel stocks back up from their March lows. But Fed Chair, Jerome Powell, made comments indicating that the FOMC wasn’t about to ratchet up the support by much more. It was more of a wait-and-see indication.
That left investors a bit underwhelmed, so stock prices fell with tech stocks posting the biggest falls. The lack of additional stimulus also meant that the value of the dollar was not likely to be undermined soon (low interest rates and QE both push the value of a country’s currency down). Without more stimulus, the value of the dollar rose. And that put a bit more pressure on US exporters.
In macro-economic gorgeousness, retail sales grew, mortgage applications dropped and house builders continued to have a positive outlook thanks to the very low interest rates making mortgages so cheap.
All in all, it was a bit of a dull day, and the S&P 500 closed 0.5% lower.
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UK
In the UK, the latest inflation figures came in and showed that price rises had slowed more than expected. The eat-out-to-help-out scheme had a major influence on lower food prices. The higher the rate of inflation, the less value a currency has. So the value of the pound rose because inflation was lower (i.e. not eroding the value of £1 so quickly). And that’s bad for exporters, hence the FTSE 100 closed 0.4% lower while the more domestically focused FTSE 250 stayed pretty close to its opening price.
Notable movers included aircraft engine-maker, Rolls Royce, which dropped by 5.4% after announcing that it was considering issuing more bonds (i.e. taking on more debt) or selling more shares (i.e. diluting the value of existing shares) to raise money. Retailer Morrisons also dropped by 4.0% after receiving a broker downgrade (i.e. a financial house saying that it had less confidence in the company’s outlook).
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Continental Europe
European stocks were less knocked about by currency movements yesterday. The Euro Stoxx 50 and German DAX closed 0.2% and 0.3% higher as folk awaited the latest announcement from the FOMC (see US section).
The one big mover of note was Spanish retail giant, Inditex (owner of Zara and a few others). It posted resilient performance in the three months to the end of June and, as a result, jumped by 8.1% on the day.
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Elsewhere
The Bank of Japan kept its asset-purchases and bond-yield targets in place. That combined with the underwhelming announcement from the US meant that stocks dribbled downwards. The fall was more pronounced in Australia where the S&P/ASX 200 closed 1.2% lower, dragged down by lower iron ore prices which pulled the huge mining sector down.
It’s a bit miserable across the rest of the Asia Pacific region as well with major national stock benchmark indices generally down on the lack of new support from central banks over the past 24 hours.
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WTF (What’s The Fact?)
The champions
I do love a good typo. It’s easily done as you will know from reading this humble missive. But here’s one that, shall we say, came up in the description of the most bizarre world championships.
The “Air sex world championships” involves a number of fully clothed contestants mimicking a sexual act. When writing about it, the folk at Wonderlist.com were clearly in a bit of a hurry, because they gave the three rules as, no nudity, an imaginary person or object must be involved and “all orgasms must be stimulated”. Er, I think you mean simulated.
Other splendid jousts include the “world” toe wrestling championships, which has proven to be remarkably popular. The current champion is Alan “Nasty” Nash.
And, of course, who could forget the world hide-and-seek championship. I don’t know who the current champion is, but they’ll never be as good as Lord Lucan.
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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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