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Aug 30, 2019

The week in IR: Dow jumps 300 points, Tadawul joins MSCI index and UK prorogue splits opinion

This week’s IR-related stories from around the web

At the start of the week and for the first time since 2009, the S&P 500’s dividend was yielding more than 30-year Treasury bonds, reported CNBC. Bespoke Investment’s Paul Hickey noted that for an investor looking to the long term, it makes equities attractive.

The combined market value of Altria and Philip Morris International fell on Tuesday by $13 bn after the revelation of merger talks, which were exposed to unsettle the two tobacco behemoths, stated the FT.

UK domestic stocks fell Wednesday suffering from Brexit sensitivity, as worries deepened about the country leaving the EU without a deal, reported Reuters. ‘Until we get a change in the dynamic, they’re going to continue to underperform,’ warned Rory McPherson, investment director at Psigma Investment Management.

Asian stocks were also varied on Wednesday as doubt over the future of US-China trade relations continued to hang over markets, highlighted CNN, finishing off what has been a bad month for Asian markets. Meanwhile, in Italy, bond yields fell to a record low – below 1 percent – as signs of progress to a new investor-friendly government emerged, reported the FT.

On Thursday, emerging market stocks stabilized as talk of renewed US-China trade negotiations calmed investors. The MSCI Emerging Markets Index bounced up after China’s commerce ministry said both the US and China were back discussing trade talks – scheduled to be held in September, reported Reuters.

The Dow also jumped 300 points after China’s announcement that it wished to resolve its protracted trade dispute with the world’s largest economy with a ‘calm’ attitude, shifting the narrative somewhat, reported CNBC.

Shares dropped by almost 30 percent in IT management services specialist Micro Focus after it warned its annual sales would fall even shorter than previously expected. The FT reported that the company – which has been under pressure since its $8.8 bn takeover of Hewlett Packard Enterprise’s software business in 2017 – said on Thursday that ‘weak sales execution’ was compounded by a ‘deteriorating macro environment’.

The fast-tracking of the UK Treasury’s spending review and the decision by UK Prime Minister Boris Johnson to prorogue Parliament increase the chances of a snap election and ensure there are to be months of ‘turmoil in the financial markets’, according to an analysis by Larry Elliot in The Guardian.

Thursday brought a momentous occasion for Saudi Arabia’s stock exchange, the Tadawul, which completed its inclusion into the MSCI Emerging Markets Index, reported CNBC.

On the last day of trading in August, European stocks gained on Friday morning after the easing of tensions in the US-China trade war, reported CNBC. Stocks worldwide also experienced an improvement: with stocks in Asia trading higher Friday. 

Scott Clemons, chief investment strategist at US private bank Brown Brothers Harriman came up with an Alice in Wonderland citation in summing up the financial markets in August, which he said: ‘Stepped through the looking glass’ reported the FT. As markets challenged unquestioned investment beliefs during the month, they also seem to indicate trouble ahead.

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