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Contents Click on the links below to get to the stuff you really really want. USA – Record daily Covid cases eclipsed by news of potential vaccine; Stocks rocket; Biden’s powers limited (#USA) UK – Travel and leisure stocks led massive gains, with oil and banks trailing; Bonds more volatile (#UK) Continental Europe – Oil, banks, travel and leisure companies shoot up (#Europe) Elsewhere – Euphoria has already worn off (#Elsewhere) WTF – From a friend (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
You wouldn’t know it, but the US has reported more than 126,000 new Covid-19 cases for two days running. That’s a horrible record. But, as I’ve mentioned before, stocks go up on rumour and down on fact, and rumour was definitely on top yesterday.
News that the vaccine being developed by Pfizer and BioNTech had prevented more than 90% of infections in a study of thousands of volunteers came as a massive and long-awaited boost to investor sentiment. There’s still plenty to be sorted out before the vaccine can be usefully applied: it needs to be stored at insanely low temperatures, it has to be distributed and prioritised and we don’t know yet if it prevents contagion or just illness.
Nevertheless, it was the news (albeit in part) that we’ve all been waiting for. Stocks went nuts. Travel and leisure stocks rocketed while tech and delivery stocks, which have fared so well during the lockdown, fell. The tech-heavy Nasdaq Composite fell by 1.5% while the more mixed S&P 500 added 1.2% on the day.
These moves added to steady gains that had been registered since it became clear that Biden had won, but would be unlikely to do much because he seems unlikely to win control of the Senate. That meant that the stimulus money would come, but higher taxes and pro-green legislation would have to get past Senate Leader, Republican and chinless wonder, Mitch McConnell aka “The Grim Reaper” – so called (by himself) because of all the legislation that he blocked when Obama was president.
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UK
Stock price gains were higher in the UK where stocks have been hammered by the lockdown and the prospects of a no-deal Brexit. The news that the vaccine looked as though it could be a seriously effective treatment sent stocks registering sky-high gains (albeit from low bases).
The FTSE 100 and FTSE 250 made massive overall gains of 4.7% and 5.2% respectively. Travel and leisure stocks, such as Rolls-Royce aircraft engineering, IAG (British Airways), Cineworld, Carnival and EasyJet rocketed by between 35% and 44% during yesterday’s trading.
Stocks had been gaining steadily on news that Biden had won, Trump’s challenges would be ineffective, and Biden wouldn’t be able to change much. But the real leap was down to the vaccine.
Bonds reflected a slightly more volatile story for once. The demand for prices of benchmark 10-year Gilts (UK government bonds) rose when investors thought the US election outcome could be disputed and wanted somewhere relatively “safe” in which to park their money. Their demand and prices fell back as it became clear that Biden had won quite clearly. And, as news of the vaccine came through, prices dropped sharply. The yield of a bond moves in opposite direction to its price, so yields on 10-year Gilts dropped to 0.17% when investors were most worried about the US election, and leapt to 0.40% yesterday, the highest they’ve been since April.
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Continental Europe
Stocks across the continent were also shooting up. The Euro Stoxx 50 and German DAX added 6.4% and 4.9% respectively as oil majors benefited from anticipation of higher demand, while travel and leisure companies joined banks on sharp gains. Delivery Hero sank by 5.8% as its prospects of making another killing during an extended lockdown receded in the shadow of a potential vaccine.
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Elsewhere
The euphoria has already worn off across most of the Asia Pacific region this morning. Investors there were coming to terms with the reality that any vaccine would still have plenty of challenges to overcome before it could be effectively deployed.
At the same time, the wait for more US stimulus and rising virus cases couldn’t be forgotten for a further day’s trading, so stock price gains were curtailed and modest in general.
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WTF (What’s The Fact?)
From a friend
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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’re unable to recognise the devil’s ear wax when you see it, then you’re on your own.
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============================================================ Copyright © 2020 Chris Hurst, All rights reserved.
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