Markets Catching up with Reality?

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Markets seem risk off.
The FT says this is because the reality of a second lockdown is dawning on them. Presumably, Mnuchin and Kudlow will be wheeled out onto CNBC to say everything in the garden is loveley.

I missed this when it was posted, but it’s as relevant now as a month ago. It basically says that a lot of positive data is misleading: particularly diffusion indexes (like PMI readings). The fact that after a catastrophic drop in output a lot of purchasing managers expect things to be a bit better next month does not mean that we will rapidly return to previous levels of activity.

The DAX is down 3% as I type.

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Oil has destroyed a lot of value in the USA in recent years. Fracking has been a disaster, financially. It barely made sense at $100 a barrel, but now it’s insane. $CVX is losing money, still, as are all the major frackers.

Wrap

Well, the equity indexes recovered during the day, with the Russell 2000 finishing 1% higher. Treasuries were unchanged. Nat Gas ended up 5.4%, gold 0.4%, oil (WTI) unchanged. Pretty much a re-run of all the down days we’ve seen over the last six months. The UK pound seems to be sinking, maybe as the markets come to understand that we’re heading for a no-deal Brexit.

Other news

The UK and other European countries seem to be facing more lockdowns. Biden seems increasingly likely to be the next US president. Maybe Trump will end up in jail. Twitter seems to have blocked Trumps account, albeit briefly.

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