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2 January 2019

02/01/2019

Morning Chat & Market Data

Morning Chat

Santa left presents, but the Grinch took December: When equity markets closed in the last hours before Christmas, they were naughty, not nice. Santa still left some cheer, the FTSE up 0.72% since the pre-Christmas close, the French CAC +2.12%, Topix +0.40% and the S&P a whopping +6.58%! It didn’t wipe away a poor December, but it helped. Over the month, the FTSE was only -3.61%, the CAC -5.46%, DAX -6.20%, S&P -9.18% and sadly, the Topix was -10.40%, while sterling was effectively unchanged. The rotten elves? Why Brexit, Trump’s tariffs, the falling oil price and a US government shutdown.

2018 was a good year … if you stopped at September: 2018 looked good through September. Ok, a wobble after US President Trump’s tax reforms passed, but the economics were – and still are – good, corporate earnings were – and still are – robust, and inflation was – and, yes still is – moderate. Equities poor showing (bonds did little over the year) was over the Q4’s change in outlook and that we came off a solid 2017. As a result, markets saw their worst capital return in 10 or 11 years, down about 6% for the US, 10-12% for Europe and 14-25% for Asia.

So what about that outlook? Of the G10, Italy, Germany, Switzerland and Japan had falling GDP in Q3, but Italy agreed a budget, Germany’s automakers are producing again, Switzerland’s decline was modest and Japan didn’t suffer natural disasters in Q4. They should see better growth and boost the global number. The oil price fall, while painful for the likes of BP & Total, should dampen inflation. It’s Trump’s tariffs; with no new hiccups like the arrest of the Huawei CFO, we helpfully will see progress towards a deal. Stopping the US shutdown would be another plus. Solve Brexit and wow!

 

Market Data 

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +0.05 (+0.00%) at 1,083 (YTD: 0.00%; 5YR: 37.1%)
MSCI AC World Equities (USD) up +0.10 (+0.00%) at 7,772 (YTD: 0.00%; 5YR: 28.5%)
Barclays Global Aggregate Bonds up +1.14 (+0.24%) at 479 (YTD: 0.00%; 5YR: 5.5%)
 
Selected Equity Indices (Capital returns)
S&P 500 up +21.11 (+0.85%) at 2,507 (YTD: 0.00%; 5YR: 35.6%)
NASDAQ up +50.76 (+0.77%) at 6,635 (YTD: 0.00%; 5YR: 58.9%)
Euro STOXX 50 up +14.89 (+0.50%) at 3,001 (YTD: 0.00%; 5YR: -3.5%)
FTSE 100 down -5.84 (-0.09%) at 6,728 (YTD: 0.00%; 5YR: -0.3%)
CAC 40 up +51.95 (+1.11%) at 4,731 (YTD: 0.00%; 5YR: 10.1%)
DAX up +177.45 (+1.71%) at 10,559 (YTD: 0.00%; 5YR: 10.5%)
Nikkei 225 down -62.85 (-0.31%) at 20,015 (YTD: 0.00%; 5YR: 22.9%)
Hang Seng down -778.55 (-3.01%) at 25,067 (YTD: -3.01%; 5YR: 7.6%)
MSCI Emerging Markets up +0.27 (+0.03%) at 966 (YTD: 0.03%; 5YR: -3.7%)
 
Selected Government Bond Yields
US 10 Year up +0.01 at 2.69 (began the year at 2.68; 5 years ago it was 2.99)
US 2 Year up +0.03 at 2.52 (began the year at 2.49; 5 years ago it was 0.38)
UK 10 Year unchanged at 1.28 (began the year at 1.28; 5 years ago it was 3.03)
Germany 10 Year down -0.19 at 0.22 (began the year at 0.24; 5 years ago it was 1.94)
France 10 Year down -0.10 at 0.68 (began the year at 0.70; 5 years ago it was 2.56)
Italy 10 Year down -0.81 at 2.74 (began the year at 2.74; 5 years ago it was 3.97)
Japan 10 Year down -0.13 at -0.01 (began the year at -0.01; 5 years ago it was 0.74)
Barclays EM Basket down 0.00 at 6.22 (began the year at 5.49; 5 years ago it was 5.85)
 
Selected Currencies
€/$ down +0.002 (+0.17%) at 1.148 (YTD: 0.26%; 5YR: -16.0%)
£/€ up -0.002 (+0.14%) at 1.111 (YTD: -0.20%; 5YR: -8.2%)
£/$ down -0.001 (-0.04%) at 1.275 (YTD: 0.06%; 5YR: -22.4%)
$/¥ down +0.40 (-0.37%) at 109.29 (YTD: -0.34%; 5YR: 4.1%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.52 (-0.98%) at 52.30 (YTD: -1.64%; 5YR: -51.4%)
WTI Crude ($/bbl) down +0.08 (+0.18%) at 45.41 (YTD: -24.84%; 5YR: -53.9%)
Gold ($/ozt) up +8.39 (+0.66%) at 1285.47 (YTD: 0.24%; 5YR: 5.0%)
Copper ($/mt) down -32.00 (-0.53%) at 5965.00 (YTD: -17.69%; 5YR: -19.0%)
 
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