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4 April 2019

04/04/2019

Morning Chat and Market Data

Morning Chat So not too bad really: The Institute for Supply Management’s (ISM) non-manufacturing sector report showed growth was continuing but at a slower pace. Their survey registered 56.1 for March, 3.6 lower than February, below estimates and a 19-month low. Similarly, the Markit US Services PMI showed a slower March pace of 55.3 versus 56.0 last month. While both show a slowdown, both indices remain well above 50, and the underlying commentary from both has respondents remaining optimistic, with new orders rising, but concerns over employment and capacity constraints. The S&P500 certainly took the news well, rising 0.21% by the close. Weighing in: Nolan Bushnell, founder of Atari, once said “the ultimate inspiration is the deadline”, and Jean-Claude Juncker’s speech yesterday resolutely reaffirmed the Brexit deadline. He stated there will be no short-term extension after April 12 unless the Withdrawal Agreement (and embedded Backstop) is approved beforehand, otherwise it could jeopardise the European elections. Likewise, failure to agree makes a no-deal scenario more likely. No doubt he was looking to inspire Theresa May and Jeremy Corbyn to jointly get the job done. Given sterling’s rally to $1.3156, the market thinks they will, factoring in either the deal or a long extension. Let the chips rise if they may: Noted Asian tech industry newspaper DigiTimes reported yesterday that Taiwan Semiconductor is seeing a robust pick-up in 7 nanometre (7nm) chip orders which could push them to full capacity by mid-year or so. 7nm chips, manufactured using an ultra-violet photography-like process called EUV, are slated for use in next-generation equipment and any increase bodes well for the semiconductor sector. US companies Advanced Micro Devices, Micron and Nvidia rallied 8.49%, 3.44% and 3.07% respectively on the news as did French company ST Microelectronincs up 4.68%. It’s a significant positive shift after past sector guidance. MPs passed Yvette Cooper's motion 313-312 requiring the government to seek an extension - probably lengthy - to Article 50 to avoid a no-deal. It still has to pass the Lords to become law. Meanwhile SpeakerJohn Bercow cast a deciding vote to end further indicative votes. Market Data Selected Global Aggregates (Total returns, unhedged) MSCI AC World Equities (Local) up +5.29 (+0.43%) at 1,238 (YTD: 14.30%; 5YR: 54.5%) MSCI AC World Equities (USD) up +47.08 (+0.53%) at 8,902 (YTD: 14.54%; 5YR: 44.9%) Barclays Global Aggregate Bonds down -0.18 (-0.04%) at 487 (YTD: 1.78%; 5YR: 5.0%) Selected Equity Indices (Capital returns) S&P 500 up +6.16 (+0.21%) at 2,873 (YTD: 14.62%; 5YR: 54.1%) NASDAQ up +46.86 (+0.60%) at 7,896 (YTD: 18.99%; 5YR: 91.3%) Euro STOXX 50 up +39.86 (+1.17%) at 3,436 (YTD: 14.46%; 5YR: 6.4%) FTSE 100 up +27.16 (+0.37%) at 7,418 (YTD: 10.26%; 5YR: 10.8%) CAC 40 up +45.44 (+0.84%) at 5,469 (YTD: 15.60%; 5YR: 22.0%) DAX up +199.61 (+1.70%) at 11,954 (YTD: 13.22%; 5YR: 23.3%) Nikkei 225 up +11.74 (+0.05%) at 21,725 (YTD: 8.54%; 5YR: 44.2%) Hang Seng down -133.67 (-0.45%) at 29,853 (YTD: 15.50%; 5YR: 32.6%) MSCI Emerging Markets up +8.66 (+0.81%) at 1,080 (YTD: 11.81%; 5YR: 7.8%) Selected Government Bond Yields US 10 Year down -0.02 at 2.50 (began the year at 2.68; 5 years ago it was 2.72) US 2 Year down -0.01 at 2.32 (began the year at 2.49; 5 years ago it was 0.41) UK 10 Year up +0.09 at 1.10 (began the year at 1.28; 5 years ago it was 2.69) Germany 10 Year down -0.01 at 0.00 (began the year at 0.24; 5 years ago it was 1.55) France 10 Year down -0.01 at 0.39 (began the year at 0.70; 5 years ago it was 2.03) Italy 10 Year up +0.01 at 2.55 (began the year at 2.74; 5 years ago it was 3.17) Japan 10 Year down -0.05 at -0.10 (began the year at -0.01; 5 years ago it was 0.64) Barclays EM Basket down -0.01 at 6.01 (began the year at 6.22; 5 years ago it was 5.74) Selected Currencies $ strengthened +0.0003 versus € (+0.03%) at 1.1241 ($: YTD: 1.84%; 5YR: 18.0%) € weakened -0.0012 versus £ (+0.10%) at 1.1724 (€: YTD: -5.07%; 5YR: 3.2%) $ weakened -0.0013 versus £ (-0.10%) at 1.3183 ($: YTD: -3.43%; 5YR: 20.5%) ¥ strengthened +0.0600 versus $ (+0.05%) at 111.4100 (¥: YTD: 1.57%; 5YR: -7.3%) Selected Commodities Brent Crude ($/bbl) down -0.18 (-0.26%) at 68.99 (YTD: 29.75%; 5YR: -34.9%) WTI Crude ($/bbl) down -0.12 (-0.19%) at 62.46 (YTD: 37.55%; 5YR: -37.7%) Gold ($/ozt) up +3.13 (+0.24%) at 1293.09 (YTD: 0.83%; 5YR: -0.8%) Copper ($/mt) up +65.50 (+1.02%) at 6492.00 (YTD: 8.83%; 5YR: -2.3%) 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