Market Report 31st August 2020
Signs that the share markets are waking up to what is happening in the global markets with the FTSE100 down from 6818 a month ago to close on Friday at 5963.57. The Dow Jones still continues to ignore the market data and climbs up to 28653.87
There is growing concern about the increased debt levels for governments worldwide who have used quantitative easing to pump liquidity into the market to the tune of trillions and the debt/GDP ratio has exploded. There is in the short-term likely to be big tax hikes but another train of thought is the amount of gold reserves being accumulated by central banks which could be used to counter balance the debt. This is being mooted by the EU and other countries keen to get back to a gold standard. This would revalue currencies against gold to offset asset/liability ratio on balance books. Gold investors are quite excited at this prospect as gold will likely go up considerably. The third angle countries are looking at is inflation. Inflation is a tool which will make the debt level appear less but will short term affect billions of people’s buying ability. If anything we could see a combination of all three tactics used.
In the UK the Chancellor is expected to hike tax rates with a proposal that corporation tax will go up from 19% to 24% hitting an already beleaguered market and likely hindering an recovery chances in the short term. Owners of second homes are also likely to see their capital gains tax rise from 28% to 40% or 45% hitting the buy-to-let and property investment market.
Grant funds are diminishing as small and medium sized enterprises are increasingly being turned away.
Gold – lost value during the week as the volatilitiy in the market continues. Gold was down 0.79% for the week.
Silver – went against to downward trend for the week gaining 3.59% as industries start to go back to work and the silver shortage supply kicks in. Silver is a by-product of mining and with many mines shut down there are no new silver supplies for the markets.
Gold:Silver Ratio – stands at 71.64 indicating silver is still the best value investment at this stage.
Copper – Panic buying due to falling supplies globally has seen a big increase in the copper price which is up 52% since the mega drop triggered by the pandemic and is up 8% overall for 2020. With prices standing at $6605 a tonne.
Oil – the oil price collapse and deferred drilling campaigns have led to a shortage of drilling rigs for the North Sea covering UK and Norway. With drilling rigs taking a long time to get up and running companies are only considering long-term contracts of a year or more taking exploration off the market for the time being and also affecting small companies who rely on short-term contracts to operate.
Alternative Energy - Are Electric Ships Sci-Fi or a Reality? Irina Slav reports on the challenges ships are struggling with to convert to electric energy. To put this into perspective the average size of an Electric Vehicle battery is 67 kWh; An electric bus in China has a battery of 210 kWh in Denmark a ship is powered by 4300 kWh battery giving it 22 miles travelling before recharging is needed. There is an electric container ship operating between Chinese ports. Ironically, its cargo is coal. The ship hops from one port to another with the batteries being recharged while cargo is being loaded and unloaded.