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19 December 2018

19/12/2018

Morning Chat & Market Data

Morning Chat

Not oils well in energy: Fair to say the S&P was flat yesterday rising 0.01%. Most sectors were no more than 1% up or down; Consumer Staples fell a bit more than that, but the Energy sector slipped 2.35% on oil.  West Texas Intermediate fell to $46 a barrel – the lowest since September 2017 – over renewed supply gut worries.  Last time oil sustained such prices (2015-6) it caused an S&P earnings recession. It’s notably less worrying now though as the energy sector is a smaller part of the S&P, and sector earnings are roughly half as important as September 2014.

Jinping at the chance: Asian markets fell yesterday, with Japan’s Topix slipping 1.99%, the Hang Seng down 1.05% and Shanghai off 0.82%.  They’re generally lower again today. China’s President Xi Jinping’s speech marking the 40th anniversary of Deng Xiaoping’s economic Reform and Opening Up campaign triggered the declines. Seen as an opportunity to elaborate on trade negotiations with the US and announce new policy initiatives, Xi opted instead to recount the reform successes, state that “no one is in the position to dictate to the Chinese people” and reiterate the need for Communist control. Bit of a Party dampener, really.

The dilemmas of Central Banks: The US Federal Reserve may hike its Fed Funds rate today – as expected – but rarely have they hiked when equities sell-off (the last time was 1994).  Yet with President Trump tweeting not to, the Fed might appear influenced if they don’t.  The Swedish Riksbank announce their decision tomorrow.  Sweden’s Repo rate, presently at -0.5%, hasn’t seen a hike since 2011, but following the European Central Bank’s decision to end Quantitative Easing, there is pressure to even though inflation is below target. The Bank of Japan also faces low inflation, but will probably hold on Thursday.

 

Market Data
 

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -4.29 (-0.39%) at 1,098 (YTD: -5.98%; 5YR: 42.1%)
MSCI AC World Equities (USD) down -24.42 (-0.31%) at 7,866 (YTD: -7.09%; 5YR: 33.6%)
Barclays Global Aggregate Bonds up +1.25 (+0.26%) at 474 (YTD: -2.11%; 5YR: 4.6%)
 
Selected Equity Indices (Capital returns)
S&P 500 up +0.22 (+0.01%) at 2,546 (YTD: -4.77%; 5YR: 40.7%)
NASDAQ up +30.18 (+0.45%) at 6,784 (YTD: -1.73%; 5YR: 67.2%)
Euro STOXX 50 down -23.52 (-0.77%) at 3,040 (YTD: -13.24%; 5YR: 0.3%)
FTSE 100 down -71.65 (-1.06%) at 6,702 (YTD: -12.83%; 5YR: 1.8%)
CAC 40 down -45.79 (-0.95%) at 4,754 (YTD: -10.51%; 5YR: 13.8%)
DAX down -31.31 (-0.29%) at 10,741 (YTD: -16.85%; 5YR: 15.1%)
Nikkei 225  down -127.53 (-0.60%) at 20,988 (YTD: -7.81%; 5YR: 32.3%)
Hang Seng up +60.49 (+0.23%) at 25,875 (YTD: -13.52%; 5YR: 13.0%)
MSCI Emerging Markets down -4.84 (-0.50%) at 963 (YTD: -16.87%; 5YR: -2.8%) 
 
Selected Government Bond Yields
US 10 Year up +0.00 at 2.82 (began the year at 2.41; 5 years ago it was 2.93)
US 2 Year up +0.01 at 2.65 (began the year at 1.88; 5 years ago it was 0.36)
UK 10 Year up +0.01 at 1.28 (began the year at 1.19; 5 years ago it was 2.96)
Germany 10 Year down -0.15 at 0.25 (began the year at 0.42; 5 years ago it was 1.87)
France 10 Year down -0.07 at 0.71 (began the year at 0.78; 5 years ago it was 2.47)
Italy 10 Year down -0.72 at 2.82 (began the year at 2.01; 5 years ago it was 4.08)
Japan 10 Year down -0.10 at 0.03 (began the year at 0.04; 5 years ago it was 0.67)
Barclays EM Basket down -0.02 at 6.29 (began the year at 5.49; 5 years ago it was 5.81)
 
Selected Currencies
€/$ down +0.005 (+0.40%) at 1.141 (YTD: -5.13%; 5YR: -16.5%)
£/€ down +0.000 (-0.02%) at 1.112 (YTD: -1.21%; 5YR: -7.8%)
£/$ down +0.004 (+0.35%) at 1.268 (YTD: -6.26%; 5YR: -22.6%)
$/¥ down +0.20 (-0.18%) at 112.39 (YTD: -0.17%; 5YR: 7.4%)
 
Selected Commodities
Brent Crude ($/bbl) down +0.45 (+0.82%) at 55.60 (YTD: -16.79%; 5YR: -49.5%)
WTI Crude ($/bbl) down -3.64 (-7.30%) at 46.24 (YTD: -23.47%; 5YR: -52.7%)
Gold ($/ozt) up +1.10 (+0.09%) at 1250.51 (YTD: -4.03%; 5YR: 5.2%)
Copper ($/mt) down -153.00 (-2.50%) at 5970.00 (YTD: -17.62%; 5YR: -17.9%)
 
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