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7 January 2019

07/01/2019

Morning Chat and Market Data

Morning Chat

 

American Powell-wow: The S&P 500 closed up 3.43% Friday, delivering a positive first week to 2019.  The Nasdaq the same, up 4.26%.  Federal Reserve Chairman Jerome Powell’s remarks that the Fed will be “patient” with rate moves gave significant impetus to the rally. Moreover, he noted the US economy was in robust health and the market is pricing in a slowdown that not yet visible.  The other key boost – reinforcing Powell’s view – was the strongest employment data in 10 months with non-farm payrolls up 312,000, massively beating the 177,000 forecast and boosted by an upward revision to last month’s number.

Mildly pleasing and less inflated: Friday also saw European markets bounce to positive weeks too. The DAX leapt +3.37%, CAC +2.72%, Italian MIB +3.37% and FTSE +2.16%.  Yes, they were driven – like the US – by Powell, US employment, US-China talks and all that, but European inflation numbers also helped.  Eurozone inflation was 1.6% year-on-year in December versus 1.9% expected, driven by declining energy prices.  Oil’s fallen, but so too natural gas – back to September levels – after spiking massively in November on cold weather concerns.  Energy prices also drove PPI down 0.3% versus the +0.8% expected easing the interest rate outlook.

Bonds, holding bonds: Holding pretty much any UK gilts since October 2 generated at least 0.07% returns. Not just a spectre of compensation, James lost out without bonds as they at least produced positive returns since equities peaked three months ago.  UK 10-year gilts generated a total return of 2.7% and anything over 4 years at least 1.0%.  The news is better in the US, where bonds returned at least 0.5% and the 10-year 4.3%, with anything over 4 years at least 2.5%.  Europe? There too, giving 0.6% plus over 4 years and Italy? 4.4%. So, pay attention to bonds.

Market Data



Selected Global Aggregates (Total returns, unhedged) 
MSCI AC World Equities (Local) up +26.08 (+2.45%) at 1,091 (YTD: 0.73%; 5YR: 39.0%)
MSCI AC World Equities (USD) up +210.45 (+2.75%) at 7,857 (YTD: 1.09%; 5YR: 30.9%)
Barclays Global Aggregate Bonds down -0.90 (-0.19%) at 481 (YTD: 0.41%; 5YR: 6.0%)
 
Selected Equity Indices (Capital returns)
S&P 500 up +84.05 (+3.43%) at 2,532 (YTD: 1.00%; 5YR: 37.8%)
NASDAQ up +275.35 (+4.26%) at 6,739 (YTD: 1.56%; 5YR: 62.3%)
Euro STOXX 50 up +87.19 (+2.95%) at 3,042 (YTD: 1.35%; 5YR: -2.2%)
FTSE 100 up +144.76 (+2.16%) at 6,837 (YTD: 1.62%; 5YR: 1.2%)
CAC 40 up +125.63 (+2.72%) at 4,737 (YTD: 0.14%; 5YR: 11.1%)
DAX up +351.03 (+3.37%) at 10,768 (YTD: 1.98%; 5YR: 13.3%)
Nikkei 225  up +477.01 (+2.44%) at 20,039 (YTD: 0.12%; 5YR: 26.7%)
Hang Seng up +172.99 (+0.68%) at 25,799 (YTD: -0.18%; 5YR: 13.6%)
MSCI Emerging Markets up +15.39 (+1.62%) at 965 (YTD: -0.07%; 5YR: -0.7%) 
 
Selected Government Bond Yields
US 10 Year down -0.01 at 2.66 (began the year at 2.68; 5 years ago it was 2.94)
US 2 Year down 0.00 at 2.49 (began the year at 2.49; 5 years ago it was 0.39)
UK 10 Year up +0.08 at 1.28 (began the year at 1.28; 5 years ago it was 2.95)
Germany 10 Year down -0.20 at 0.20 (began the year at 0.24; 5 years ago it was 1.89)
France 10 Year down -0.08 at 0.69 (began the year at 0.70; 5 years ago it was 2.49)
Italy 10 Year down -0.66 at 2.88 (began the year at 2.74; 5 years ago it was 3.87)
Japan 10 Year down -0.15 at -0.02 (began the year at -0.01; 5 years ago it was 0.69)
Barclays EM Basket down -0.02 at 6.16 (began the year at 6.22; 5 years ago it was 5.82)
  
Selected Currencies
€/$ down +0.001 (+0.10%) at 1.142 (YTD: -0.31%; 5YR: -16.2%)
£/€ up 0.000 (+0.03%) at 1.116 (YTD: 0.28%; 5YR: -8.0%)
£/$ down +0.002 (+0.12%) at 1.274 (YTD: -0.04%; 5YR: -22.4%)
$/¥ down +0.21 (-0.19%) at 108.24 (YTD: -1.31%; 5YR: 3.5%)
 
Selected Commodities
Brent Crude ($/bbl) down +0.56 (+0.99%) at 57.14 (YTD: 7.47%; 5YR: -46.6%)
WTI Crude ($/bbl) down +0.87 (+1.85%) at 47.96 (YTD: 5.62%; 5YR: -49.0%)
Gold ($/ozt) up +5.13 (+0.40%) at 1290.28 (YTD: 0.61%; 5YR: 4.7%)
Copper ($/mt) up +182.00 (+3.17%) at 5918.00 (YTD: -0.79%; 5YR: -19.1%)
 
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