The charts that matter: the helicopters are unleashed

In a week when all sense of what's normal went out the window, John Stepek looks at what's happened to the charts that matter most to the global economy.

Good lord.

As I’m writing this, the chancellor Rishi Sunak (future PM? Maybe, as long as he doesn’t peak too soon or steal too much thunder) has just told us all that any business in the UK can ask the government to pay 80% of the wages of employees who would otherwise be laid off.

That’s incredible. The amount covered (£2,500 a month) is more than the average wage too, so this doesn’t come with a massive catch attached.

Of course, the government really had to do this because it’s shutting down all the pubs and clubs and everywhere that we go to socialise, because we can’t be trusted to stay inside ourselves (understandable if not commendable).

In our podcast earlier in the week, Merryn and I were musing on the end of capitalism and what happens now that the government is so heavily involved in the economy. Don’t get me wrong – the current crisis justifies this. This is not like 2008 (I still feel that the bank bailouts were probably necessary but definitely handled wrongly). This is needed. It genuinely is more sensible to think of this as a wartime footing, with the sorts of rampant rises in government debt that go with that.

But what happens when the crisis passes? That’ll be the start of a new era altogether.

Anyway, have a listen to that here. (You’ll also hear me play the drums very briefly).

And here are the links for this week’s editions of Money Morning plus other stories you might have missed on the website this week.

The charts that matter

Gold (measured in dollar terms) had another rough week. That’s because everyone needs dollars and because the most liquid stuff has been sold off. Again, I’d emphasise – holding some gold when governments around the world are printing money like mad is not a bad idea because of the potential long-term consequences.

(Gold: three months)

The US dollar index – a measure of the strength of the dollar against a basket of the currencies of its major trading partners – continued to surge. I explained some of the reasons behind this in Money Morning this week and the Federal Reserve has been trying to address it, so we’ll see if any of the pressure is alleviated next week.

(DXY: three months)

The Chinese yuan (or renminbi) weakened further beyond the $1/¥7 mark that gets markets nervous, but again this is a pretty minor point in a week like this.

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond continued to rise. This is partly the rush for liquidity and partly because investors realise governments will print “whatever it takes”.

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year also rose higher, all the way into slightly positive territory.

(Ten-year Japanese government bond yield: three months)

And the yield on the ten-year German Bund ticked higher too although it remained in negative territory.

(Ten-year Bund yield: three months)

Copper finally gave up the ghost and collapsed lower.

(Copper: six months)

The Aussie dollar collapsed lower too.

(Aussie dollar vs US dollar exchange rate: three months)

Cryptocurrency bitcoin had a surprisingly calm week relative to everything else.

(Bitcoin: ten days)

US weekly jobless claims rocketed higher to 281,000. The four-week moving average now sits at 232,250. Clearly, we’ve seen the trough for this cycle. And it’s going to get a lot worse – Goldman Sachs estimated a surge to over two million next week (that’s not a typo).

(US jobless claims, four-week moving average: since January 2016)

The oil price (as measured by Brent crude, the international/European benchmark) continued to fall although it rallied a little towards the end of the week as American hinted that it might intervene to buy more oil to prop up US shale producers.

(Brent crude oil: three months)

Amazon rallied – if any company might do well out of everyone being stuck at home for a prolonged period, you’d think it would be Amazon.

(Amazon: three months)

Electric car group Tesla continued to fall back, although it’s still well ahead of where it was a year ago.

(Tesla: three months)

Have a good weekend.

Recommended

Hong Kong’s crown slips as Singapore takes over
Asian economy

Hong Kong’s crown slips as Singapore takes over

As international sentiment sours on Hong Kong, other Asian financial hubs – primarily Singapore – are snapping up business.
6 Jul 2022
Price of gas soars as Moscow turns off the taps
Gas

Price of gas soars as Moscow turns off the taps

As Russia cuts its gas exports to the EU, the price of natural gas continues to rise. Restricted supplies could see energy rationing and recession i…
6 Jul 2022
Low growth and high inflation: a toxic cocktail for anxious markets
Stockmarkets

Low growth and high inflation: a toxic cocktail for anxious markets

Low growth, high inflation, central bank tightening, a strong dollar, and the risk of recession is proving a toxic cocktail for world stockmarkets – a…
6 Jul 2022
How to cut the cost of childcare
Personal finance

How to cut the cost of childcare

Childcare is expensive, yet few people are drawing upon all the government support they are entitled to. Ruth Jackson-Kirby explains what help is avai…
6 Jul 2022

Most Popular

Is inflation about to drop as recession takes hold?
UK Economy

Is inflation about to drop as recession takes hold?

Central banks are raising interest rates in an attempt to curb soaring inflation. But will that push the economy into recession? John Stepek looks at …
5 Jul 2022
Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
Is it OK to buy Scottish Mortgage investment trust again?
Investment trusts

Is it OK to buy Scottish Mortgage investment trust again?

Scottish Mortgage investment was hit hard by the tech-stock crash, and it is still being buffeted by headwinds. Should new investors wait for those to…
5 Jul 2022