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8 August 2019

08/08/2019

Market Data and Morning Chat

Morning Chat

If they always yield, how can they ever succeed? Archbishop Thomas a Becket wasn’t speaking about the global bond market, but maybe bond traders misinterpreted him. Bond yields have plummeted over the last three months with a further $5trillion of issues – about 8% of the total – falling to negative yields. It means a quarter of all bonds will lose you money and the decline has been accelerating. Germany fleetingly saw its 30-year bund trade in negative territory, and the US 30-year is closing back in on its all-time low (though still offers 2.1% for now). For what we don’t receive…

The wild, wild west: Falling bond yields means rising bond prices meaning money flowing to bonds implying investors are heading to safety and getting shot of riskier assets – read equities – which should be falling. Except yesterday, with rates sliding, the western equity markets, slipping at first, staged a strong rebound with most closing in the green. Over in New York, stock markets were quickly down around 2% yet recovered completely – the biggest one-day sell-off & recovery this year – while the three big European markets closed up 1% after similar wild rides. We’re not riding off into the sunset just yet.

Gold, black gold: Gold – the yellow stuff – continued its strong rally, cracking $1,500 an ounce– at least until equities turned things around. Black gold – crude – headed the other way. The issue was inventories. Normally, this time of year, US inventories should be sliding lower as the stockpile falls powering cars and air conditioners. This year, after some hesitancy, the Energy Information Administration (EIA) oil inventories were declining relentlessly – until now. This week, counter to expectations, the EIA announced a 2.4million barrel inventory gain. That in turn has helped crude prices to drill significantly lower on concerns of a demand slowdown.

Uncle Sam's tax man has cheerfully pocketed $63billion from Trump’s tariffs – that’ll fill a hole or two
Standard Life Aberdeen (-7.5%) sees profits down as clients shift from higher margin products
Glencore (-0.9%) more than a few coppers short as earnings fall 32% on lower commodity prices
International Airlines Group (+2.4%) glides up on fixing IT glitch and lower oil prices
Commerz banks similar net profits to last year, but tempering of guidance knocks shares 6.4%

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +2.11 (+0.17%) at 1,226 (YTD: 13.14%; 5YR: 49.3%)
MSCI AC World Equities (USD) up +20.51 (+0.23%) at 8,864 (YTD: 14.05%; 5YR: 41.7%)
Barclays Global Aggregate Bonds up +2.34 (+0.46%) at 512 (YTD: 7.00%; 5YR: 7.9%)

Selected Equity Indices (Capital returns)
S&P 500 up +2.21 (+0.08%) at 2,884 (YTD: 15.04%; 5YR: 49.3%)
NASDAQ up +29.56 (+0.38%) at 7,863 (YTD: 18.50%; 5YR: 79.9%)
Euro STOXX 50 up +18.33 (+0.56%) at 3,310 (YTD: 10.28%; 5YR: 10.1%)
FTSE 100 up +27.01 (+0.38%) at 7,199 (YTD: 6.99%; 5YR: 9.6%)
CAC up +31.86 (+0.61%) at 5,267 (YTD: 11.33%; 5YR: 27.0%)
DAX up +82.19 (+0.71%) at 11,650 (YTD: 10.33%; 5YR: 29.3%)
Nikkei 225 up +76.79 (+0.37%) at 20,593 (YTD: 2.89%; 5YR: 39.3%)
Hang Seng up +167.81 (+0.65%) at 26,165 (YTD: 1.23%; 5YR: 7.5%)
MSCI Emerging Markets down -0.02 (0.00%) at 973 (YTD: 0.71%; 5YR: -7.0%)

Selected Government Bond Yields
US 10 Year down 0.00 at 1.73 (began the year at 2.68; 5 years ago it was 2.42)
US 2 Year down -0.01 at 1.60 (began the year at 2.49; 5 years ago it was 0.44)
UK 10 Year down -0.03 at 0.49 (began the year at 1.28; 5 years ago it was 2.46)
Germany 10 Year up +0.07 at -0.51 (began the year at 0.24; 5 years ago it was 1.05)
France 10 Year up +0.07 at -0.25 (began the year at 0.70; 5 years ago it was 1.46)
Italy 10 Year up +0.13 at 1.55 (began the year at 2.74; 5 years ago it was 2.81)
Japan 10 Year down 0.00 at -0.20 (began the year at -0.01; 5 years ago it was 0.50)
Barclays EM Basket down -0.07 at 5.67 (began the year at 6.22; 5 years ago it was 5.44)

Selected Currencies
$ strengthened +0.0023 versus € (+0.20%) at 1.1204 ($: YTD: 2.17%; 5YR: 16.5%)
€ weakened -0.0027 versus £ (+0.25%) at 1.0854 (€: YTD: 2.54%; 5YR: 15.2%)
$ weakened -0.0005 versus £ (-0.04%) at 1.2160 ($: YTD: 4.60%; 5YR: 27.5%)
¥ weakened -0.3100 versus $ (-0.29%) at 106.1300 (¥: YTD: -3.33%; 5YR: -4.0%)

Selected Commodities
Brent Crude ($/bbl) up +0.42 (+0.74%) at 57.50 (YTD: 8.14%; 5YR: -44.6%)
WTI Crude ($/bbl) down -2.54 (-4.74%) at 51.09 (YTD: 12.51%; 5YR: -47.5%)
Gold ($/ozt) down -1.09 (-0.07%) at 1500.19 (YTD: 16.98%; 5YR: 14.4%)
Copper ($/mt) up +22.00 (+0.39%) at 5705.00 (YTD: -4.36%; 5YR: -18.5%)

Data sourced from Bloomberg as of the close of last trading day.
YTD = Year-to-date return; 5YR = five year return

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros