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2 May 2019

02/05/2019

Morning Chat and Market Data

Morning Chat

Ineffective healthcare: Continental European markets closed yesterday for Labour Day (another point of disagreement with the Americans who celebrate LaborDay in September all the more amusing as May 1 celebrates the anniversary of the Haymarket affair in Chicago). So, May Day left the UK market without support. The FTSE 100 closed down 0.44%. Initial gains from Sainsbury’s (+3.91% on solid earnings) and Next (+0.97% with in-line numbers and good April) couldn’t be sustained. GlaxoSmithKline saw healthy earnings – beating estimates – but alongside AstraZeneca, neither were properly inoculated against negative sentiment and between them they accounted for half the FTSE100 decline.

Is it ironic the oil price faces a lot of moving parts? Since Christmas, oil prices have rallied. Brent crude is now $72.11 a barrel, about 45% more than when Santa visited, but down a couple bucks over last seven or eight days. Oh, and it’s rallying again. The big macro driver is the choking off of supply because of the US sanctions on Iran – and waivers end today – but demand has also slipped with the slower global growth. More micro, Juan Guido’s call for Venezuela to overthrow Nicolas Maduro and the cut in US drill rigs push the price up

The can less kicked: US-China trade talk commentary is generally optimistic with a working assumption of a deal. However, speaking Tuesday at the Milken Institute, Mick Mulvaney, US President Donald Trump’s acting Chief of Staff since February (long-tenured for Trump), had a less positive tone. Stating “OK, we’re close… [but] at some point you just throw your hands up… You’ll know one way or the other in the next couple of weeks”, hinting the White House’s patience is wearing thin. He wasn’t overly positive for the new NAFTA suggesting Nancy Pelosi will hold it from a ratification vote. Not good.

The US Fed held rates steady, but the wording of the statement knocks the S&P500 by 0.75%
Estee Lauder put its best face forward with $1.55 earnings-per-share, 20% better than expected.
Yum Brands saw 11 herbs and spices help offset crusty Pizza Hut sales to narrowly beat forecasts
CVS Health’s $1.62 earnings-per-share was just what the pharmacist ordered; shares jumped 5.42%.
Finally, when Americans say "don't wear white after Labor Day", they're talking September not May, otherwise it would really throw a wobbly for the cricket season and Wimbledon!

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -5.35 (-0.42%) at 1,257 (YTD: 16.07%; 5YR: 56.3%)
MSCI AC World Equities (USD) down -35.94 (-0.40%) at 9,034 (YTD: 16.24%; 5YR: 45.6%)
Barclays Global Aggregate Bonds up +0.79 (+0.16%) at 489 (YTD: 2.06%; 5YR: 3.8%)

Selected Equity Indices (Capital returns)
S&P 500 down -22.10 (-0.75%) at 2,924 (YTD: 16.63%; 5YR: 55.4%)
NASDAQ down -45.75 (-0.57%) at 8,050 (YTD: 21.32%; 5YR: 95.2%)
Euro STOXX 50 unchanged 0.00 (0.00%) at 3,515 (YTD: 17.10%; 5YR: 10.6%)
FTSE 100 down -32.96 (-0.44%) at 7,385 (YTD: 9.77%; 5YR: 8.2%)
CAC 40 up +5.43 (+0.10%) at 5,586 (YTD: 18.09%; 5YR: 24.5%)
DAX up +16.06 (+0.13%) at 12,344 (YTD: 16.91%; 5YR: 28.5%)
Nikkei 225 down -48.85 (-0.22%) at 22,259 (YTD: 11.21%; 5YR: 55.8%)
Hang Seng up +186.84 (+0.63%) at 29,886 (YTD: 15.63%; 5YR: 35.0%)
MSCI Emerging Markets up +1.24 (+0.11%) at 1,080 (YTD: 11.88%; 5YR: 7.7%)

Selected Government Bond Yields
US 10 Year up +0.02 at 2.52 (began the year at 2.68; 5 years ago it was 2.58)
US 2 Year up +0.02 at 2.32 (began the year at 2.49; 5 years ago it was 0.42)
UK 10 Year down -0.04 at 1.15 (began the year at 1.28; 5 years ago it was 2.64)
Germany 10 Year up +0.00 at 0.01 (began the year at 0.24; 5 years ago it was 1.45)
France 10 Year down 0.00 at 0.37 (began the year at 0.70; 5 years ago it was 1.92)
Italy 10 Year down 0.00 at 2.55 (began the year at 2.74; 5 years ago it was 3.04)
Japan 10 Year down -0.01 at -0.05 (began the year at -0.01; 5 years ago it was 0.61)
Barclays EM Basket up +0.03 at 6.07 (began the year at 6.22; 5 years ago it was 5.63)

Selected Currencies
$ strengthened +0.0042 versus € (+0.37%) at 1.1200 ($: YTD: 2.20%; 5YR: 19.2%)
€ weakened -0.0022 versus £ (+0.19%) at 1.1655 (€: YTD: -4.50%; 5YR: 4.4%)
$ strengthened +0.0028 versus £ (+0.21%) at 1.3053 ($: YTD: -2.41%; 5YR: 22.6%)
¥ weakened -0.3900 versus $ (-0.35%) at 111.5500 (¥: YTD: 1.69%; 5YR: -8.3%)

Selected Commodities
Brent Crude ($/bbl) down -0.25 (-0.35%) at 72.08 (YTD: 35.57%; 5YR: -33.7%)
WTI Crude ($/bbl) down -0.31 (-0.49%) at 63.60 (YTD: 40.06%; 5YR: -36.0%)
Gold ($/ozt) down -5.25 (-0.41%) at 1271.53 (YTD: -0.85%; 5YR: -2.2%)
Copper ($/mt) down -180.00 (-2.81%) at 6235.00 (YTD: 4.53%; 5YR: -6.2%)

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