Take Five: Impasse!
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[August 14, 2020] 1/WALL
STREET WATCHES WASHINGTON
U.S. lawmakers negotiating a fresh dose of stimulus have reached an
impasse.
Trillions of dollars injected by the Federal Reserve and huge government
spending increases have stemmed coronavirus-linked economic damage,
fuelling a rebound in a Citi index that tracks economic data relative to
expectations.
But with almost 30 million Americans unemployed and coronavirus still
spreading, Fed policymakers have been warning the recovery could sputter
unless politicians come through with further measures. The S&P500 index
is holding just off record highs. The wait is on to see if negotiations
resume and bear fruit.
-White House, Democrats show no sign of budging on U.S. coronavirus
aid-COVID-19 crushes U.S. economy in second quarter; rising virus cases
loom over recovery
Graphic: Citi's U.S. economic surprise index
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2/LET'S BREXIT AGAIN
The twin troubles of Brexit and coronavirus ensured Britain's
second-quarter contraction of 20.4% was greater than any other major
economy's. And recovery will be elusive unless a free-trade deal is
reached with the European Union before the post-Brexit transition period
ends on Dec. 31.
EU-UK talks begin on Aug 17. The two sides remain far apart, but the
meetings may show if they can lay aside their differences in time to
reach a deal by the Oct. 2 deadline. An impasse may spell trouble for
sterling and further pressure on domestic-focused shares.
The Bank of England is not considering negative interest rates just yet,
but the prospect of crashing out of the European Union without a deal
might leave it with no alternative.
Graphic: Poised for losses?
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3/GOLD FOR GREENBACKS
The dollar's 5% plunge in five weeks has got gold bugs excited. Prices
for the metal vaulted to a record above $2,000 per ounce before
retreating as the greenback regained some poise.
Dollar weakness could run further -- it remains strong across various
trade-weighted indexes. But correlations between gold and the dollar,
tenuous at best, have weakened under the impact of central bank
stimulus, with 90-day correlations approaching cyclical lows.
Finally, rising inflation expectations boost hedges such as gold.
Refinitiv data shows U.S., UK, German and Japanese 10-year real,
inflation-adjusted yields in negative territory, a first for all of them
simultaneously. So even if gold struggles above $2,000, gold bugs can
probably rest assured a big selloff isn't imminent.
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A man walks a dog in the shade away from the midday sun past the New
York Stock Exchange (NYSE) building in Manhattan, during hot weather
in New York City, New York, U.S., August 11, 2020. REUTERS/Mike
Segar
Graphic: Gold - shining bright
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4/DOING THE SPLITS
Apple and Tesla's stock-split announcements rekindle memories of the dotcom
bubble, when companies were actively dividing shares into multiple new ones.
That trend eventually died -- is it making a comeback?
Tesla is giving out five shares for each share held; Apple has a four-for-one
offer. Companies typically split shares to make them cheaper for retail
investors, but these days, with platforms already offering fractional shares for
as little as $1, such splits don't attract investors in droves. Shares have
risen since the announcements, but it remains to be seen whether gains continue
until Aug. 31, when trading starts on a split-adjusted basis for both Apple and
Tesla.
Graphic: Where did all the stock splits go? https://graphics.reuters.com/APPLE-RESULTS/SPLIT/yxmvjrjgevr/chart.png
5/THE BIG AUSTRALIAN
The world's biggest listed mining company and the third-biggest digger of iron
ore, Australia's BHP, reports annual results on Tuesday. With iron ore prices
soaring and rival Rio Tinto beating forecasts, strong numbers are expected of
BHP. But BHP is more than just a miner -- steel is a bellwether for economic
growth and its main ingredient, iron ore, sits at a critical juncture. Many
question whether Chinese demand is enough to offset crumbling orders elsewhere.
BHP is also a gauge of China's economic health. After July shipments to China
from the world's largest export hub, Australia's Port Hedland, dipped 17.5% from
June, investors will be listening out for management's view on the outlook.
Graphic: China iron ore imports
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ChinaIronOreImportsthroughJul2020.png
(Reporting by Sujata Rao, Saikat Chatterjee and Thyagaraju Adinarayan in London,
Tom Westbrook in Singapore and Noel Randewich in New York; editing by Larry
King)
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