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Contents Click on the links below to get to the stuff you really really want. USA – Lawmakers closer to financial support deal; Monetary policy unchanged; Dollar down, stocks prices muted gains (#USA) UK – Brexit deal hopes lift pound, stocks and bond yields (#UK) Continental Europe – Business data help to lift stocks (#Europe) Elsewhere – Stocks followed US up (#Elsewhere) WTF – A gift of a gift (#WTF) Links (#Useful) Numbers (#Numbers) Ts & Cs (#Ts+Cs)
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USA
It’s still just speculation, but US lawmakers appear to be getting even closer to agreeing a financial stimulus and support package. The amount in question is $900 billion, a long way short of the two or three trillion that had been mooted. But owt’s better than nowt as far as investor sentiment is concerned.
Sentiment did take a slight knock from the latest meeting of the Federal Reserve (equivalent to the Bank of England). The number-crunching suits there left interest rate and bond-buying policies unchanged; some investors had hoped for an increase in bond-buying. But the medium-term outlook is for economic recovery, and that suggests that the Fed would want to allow that to take hold before adding more stimulus when it might not be necessary and would add to pressures pushing inflation above 2.0% over the next year or two.
Despite the lack of monetary stimulus, the value of the dollar fell as investors saw a less bleak future ahead which reduced the demand for perceived “havens” such as gold and the US dollar.
While we continue to deal with rumour rather than fact, stock price rises were limited and the propensity for investors to hang on to tech stocks (which have done well during the lockdowns) dominated moves yesterday. The tech-heavy Nasdaq Composite added 0.5% on the day while the broader S&P 500 only managed a 0.2% upwards nudge. Demand for and prices of lower-risk rated bonds eased a touch, sending the yield on the benchmark 10-year Treasury (US bond) up a touch.
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UK
In addition to the US developments, UK investors were hoping against hope that Brexit negotiators could overcome the final impediments and avoid a no-deal outcome. The noises coming from the main speakers were fairly typical: Bojo insisting that a deal at any price would be unacceptable while Von der Leyen was suggesting that a deal was “so close but so far”. In other words, Boris wants the EU to provide a number of membership benefits without membership, while VdL reckons that the offer on the table is pretty good. Only those on the inside will have the truth of it.
The apparent proximity of a deal was enough to send the FTSE 100 and FTSE 250 up by 0.9% and 1.2% respectively. The optimism lifted the value of the pound, reflecting the potentially less traumatic outlook for the UK economy, and that held back gains on the export-heavy FTSE 100. Rises were fairly broad across almost all industrial sectors with oil, healthcare and house builders all doing well.
Bond yields have recovered from the sharp dip they took a few days ago when a deal seemed to have been scuppered. The benchmark 10-year Gilt (UK government bond) yield dipped to just above 0.15% as investors bought them in order to park money away from the volatile world of stocks. The yield is trading around 0.28% at the time of writing but, as always, one has to remember that this is way off the 0.85% it was hanging around at this time last year.
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Continental Europe
Data on business activity were positive, giving stock prices across the continent a boost. The Euro Stoxx 50 and German DAX added 0.6% and 1.5% respectively.
The highest riser on the DAX was Delivery Hero. This probably has more to do with increased lockdown restrictions in Germany than the positive outlook though. Other notable movers included Bayer, Volkswagen and L’Oreal, all of which posted solid gains as sales appeared set to start the road to recovery in earnest now that the vaccine is set for a role out over the coming weeks.
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Elsewhere
Stocks are largely up across the Asia Pacific region this morning with Chinese and Australian stocks leading the way. There are several, obvious driving factors: vaccines being administered and US stimulus being the most prominent.
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WTF (What’s The Fact?)
A gift of a gift
It’s regifting day today apparently. Time to offload those naff coffee table books, soap products and any form of painted glass. A friend of mine had a competition with his brother. They had to buy each other a gift that was, in its own right, of practical use, but of no use to the sibling. The most recent one I heard about him sending to his brother’s gas centrally heated home was a sack of coal. Like 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’re unable to recognise the devil’s ear wax when you see it, then you’re on your own.
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