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5 December 2018

05/12/2018

Morning Chat & Market Data

 

Morning Chat

Winter of this contempt: The last time the government lost three votes in a day was the “Winter of Discontent”. Prime Minister May suffered her own discontent as her government lost three yesterday – no wonder the pound fell to 1,2693, its lowest in 18 months. First, a close vote to amend the contempt motion (311 to 307).  Next, the unamended contempt of Parliament motion holding Theresa May in contempt for not publishing the legal advice (311 to 293); now she must. Finally, Dominic Grieve’s amendment to give Parliament a greater voice if next week’s Brexit vote falls (321 to 299).

Devil is in the detail: Markets shed Monday’s gains yesterday with the S&P down 3.24%, FTSE 100 down 0.56% and EuroStoxx 50 down 0.80% with the dollar weakening as well. The sell-off was initially triggered by comments from US Treasury Secretary Steve Mnuchin and economic advisor Larry Kudlow dampening tariff deal expectations, and highlighting that President Trump’s agreement was, surprisingly, short on details.  As Brexit shows, details can be hellish. However, it was the slight flattening of the US yield curve (between the 2 and 5-year bonds) potentially foreshadowing slower growth from tariff troubles that intensified the later S&P decline.

Yellow vested interest: The CAC 40 is one of the strongest EU markets this year down only 2.82% in Euro terms, total return (-2.51% in sterling), but since November 17th when the first inklings of the Gilet Jaunes or Yellow Vest movement crept into the news France has been the worst, down 0.12% (Euro terms TR); while the EuroStoxx 50 is up 0.35%.  The problem is the anarchistic protests of the Yellow Vests, which started over the diesel taxes President Macron introduced. Macron appears to be backtracking, as French Presidents do with protests, but it could also park future reforms

The US will observe a day of mourning over the passing of President George Bush today and markets will be closed.

Market Data 


Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -26.06 (-2.20%) at 1,156 (YTD: -0.96%; 5YR: 51.6%)
MSCI AC World Equities (USD) down -204.22 (-2.40%) at 8,308 (YTD: -1.87%; 5YR: 42.9%)
Barclays Global Aggregate Bonds up +1.65 (+0.35%) at 472 (YTD: -2.59%; 5YR: 3.8%) 
 
Selected Equity Indices
S&P 500 down -90.31 (-3.24%) at 2,700 (YTD: 0.99%; 5YR: 51.3%)
NASDAQ down -283.09 (-3.80%) at 7,158 (YTD: 3.69%; 5YR: 77.5%)
Euro STOXX 50 down -25.74 (-0.80%) at 3,189 (YTD: -8.98%; 5YR: 8.0%)
FTSE 100 down -39.65 (-0.56%) at 7,023 (YTD: -8.65%; 5YR: 8.1%)
CAC 40 down -41.32 (-0.82%) at 5,013 (YTD: -5.65%; 5YR: 22.3%)
DAX down -130.14 (-1.14%) at 11,335 (YTD: -12.25%; 5YR: 24.8%)
Nikkei 225  down -116.72 (-0.53%) at 21,919 (YTD: -3.71%; 5YR: 44.4%)
Hang Seng down -455.75 (-1.67%) at 26,805 (YTD: -10.41%; 5YR: 13.0%)
MSCI Emerging Markets down -2.62 (-0.26%) at 1,014 (YTD: -12.45%; 5YR: 1.6%)
 
Selected Government Bond Yields
US 10 Year unchanged at 2.91 (began the year at 2.41; 5 years ago it was 2.87)
US 2 Year unchanged at 2.79 (began the year at 1.88; 5 years ago it was 0.30)
UK 10 Year down -0.03 at 1.28 (began the year at 1.19; 5 years ago it was 2.92)
Germany 10 Year down -0.15 at 0.26 (began the year at 0.42; 5 years ago it was 1.86)
France 10 Year down -0.11 at 0.67 (began the year at 0.78; 5 years ago it was 2.44)
Italy 10 Year down -0.42 at 3.12 (began the year at 2.01; 5 years ago it was 4.22)
Japan 10 Year down -0.07 at 0.06 (began the year at 0.04; 5 years ago it was 0.63)
Barclays EM Basket down 0.00 at 6.33 (began the year at 5.49; 5 years ago it was 5.83)
  
Selected Currencies
€/$ down -0.001 (-0.08%) at 1.133 (YTD: -5.72%; 5YR: -17.1%)
£/€ down +0.001 (-0.11%) at 1.120 (YTD: -0.46%; 5YR: -6.7%)
£/$ down -0.002 (-0.18%) at 1.269 (YTD: -6.14%; 5YR: -22.3%)
$/¥ up -0.29 (+0.26%) at 113.06 (YTD: 0.42%; 5YR: 10.0%)

Selected Commodities
Brent Crude ($/bbl) down +0.03 (+0.05%) at 60.41 (YTD: -9.59%; 5YR: -45.7%)
WTI Crude ($/bbl) down +0.30 (+0.57%) at 53.25 (YTD: -11.87%; 5YR: -45.2%)
Gold ($/ozt) up -3.11 (-0.25%) at 1235.34 (YTD: -5.20%; 5YR: 0.8%)
Copper ($/mt) down -86.00 (-1.37%) at 6209.00 (YTD: -14.32%; 5YR: -12.5%)
 
Data sourced from Bloomberg as of the close of last trading day.
YTD = Year-to-date return; 5YR = five year return
 
SOURCES: BBC; The New York Times; FactSet; Al Jazeera; Financial Times; The Economist; Reuters; CNN; Wall Street Journal; CNBC; Google Finance; Seeking Alpha; The Idea Farm; Bloomberg, Twitter; Wikipedia; Investopedia; The Guardian; The Times of London; Google News; Numerous academic sources and journals; Trade bodies; Government institutions (e.g The Bank of England, The Federal Reserve).

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros