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10 January 2019

10/01/2019

Morning Chat & Market Data

Morning Chat

A glass half full kind of day: Almost globally equity markets rallied yesterday; all the major indices were in positive territory with the FTSE 100 up +0.82%, US S&P 0.41%, DAX +0.88, CAC +1.02% and Japanese Topix 1.10%. The key drivers? The optimistic tone of the US-China trade talks – which were extended by a day – with officials on both sides intimating discussions went well. Also, James Bullard, St. Louis Federal Reserve president reinforced the view rates were at a suitable level and more didn’t dismiss a rate cut if needed. Plus, the West Texas oil price rallied back over $50.

No small beer: Constellation Brands tumbled after yesterday’s 8:25am Eastern earnings release to close down 12.4%.  Earnings beat estimates hopping up 18.5% on a good head of beer sales up 16.0% year-on-year; wines and spirits however had a rum time with only 0.4% sales growth and it is too soon for much from their 38% Canopy Growth stake; overall pretty good. However, outlook, as with many companies before Christmas, was the issue. However, rather than China, Constellation faces increasing costs for transportation and marketing. Indeed, with too few truckers and high wages trucking freight charges are a US-wide costs issue.

Whither productivity: Some things pass the news by, like Japan ending its 1996 UK beef ban following the BSE scare and yesterday’s UK labour productivity data.  Productivity remains anaemic, rising 0.2% in Q3 2018. Gains are mainly from labour skills – capital investment has given little and business processes have been destructive (regulations?). Market or non-government productivity rose 0.7% (c80% of the economy) but public service productivity – down for four quarters – fell nearly 2%, probably dealing with Brexit. Moreover, output per worker is up only 2.5% since Q4 2007 – total, not annualised – yet unit labour costs increased 2.8% last year alone.

The UK government lost another vote, this over an amendment requiring a government response within three sitting days if May’s deal is voted down.

Brexit won’t be the most expensive divorce this year as Jeff & MacKenzie Bezos announce split

Market Data  

Selected Global Aggregates (Total returns, unhedged) 
MSCI AC World Equities (Local) up +8.68 (+0.78%) at 1,117 (YTD: 3.09%; 5YR: 41.9%)
MSCI AC World Equities (USD) up +64.42 (+0.81%) at 8,052 (YTD: 3.60%; 5YR: 33.6%)
Barclays Global Aggregate Bonds up +1.39 (+0.29%) at 482 (YTD: 0.55%; 5YR: 5.7%) 
 
Selected Equity Indices (Capital returns)
S&P 500 up +10.55 (+0.41%) at 2,585 (YTD: 3.12%; 5YR: 40.3%)
NASDAQ up +60.08 (+0.87%) at 6,957 (YTD: 4.85%; 5YR: 66.6%)
Euro STOXX 50 up +15.30 (+0.50%) at 3,070 (YTD: 2.29%; 5YR: -1.1%)
FTSE 100 up +45.03 (+0.66%) at 6,907 (YTD: 2.65%; 5YR: 2.5%)
CAC 40 up +40.31 (+0.84%) at 4,814 (YTD: 1.75%; 5YR: 13.2%)
DAX up +89.34 (+0.83%) at 10,893 (YTD: 3.17%; 5YR: 15.0%)
Nikkei 225  down -263.26 (-1.29%) at 20,164 (YTD: 0.74%; 5YR: 26.7%)
Hang Seng up +2.24 (+0.01%) at 26,465 (YTD: 2.39%; 5YR: 15.8%)
MSCI Emerging Markets up +18.90 (+1.94%) at 994 (YTD: 2.98%; 5YR: 2.5%) 
 
Selected Government Bond Yields
US 10 Year down -0.02 at 2.69 (began the year at 2.68; 5 years ago it was 2.86)
US 2 Year down -0.03 at 2.53 (began the year at 2.49; 5 years ago it was 0.37)
UK 10 Year down -0.01 at 1.26 (began the year at 1.28; 5 years ago it was 2.87)
Germany 10 Year down -0.20 at 0.20 (began the year at 0.24; 5 years ago it was 1.84)
France 10 Year down -0.08 at 0.70 (began the year at 0.70; 5 years ago it was 2.50)
Italy 10 Year down -0.65 at 2.89 (began the year at 2.74; 5 years ago it was 3.92)
Japan 10 Year down -0.13 at 0.00 (began the year at -0.01; 5 years ago it was 0.70)
Barclays EM Basket down -0.02 at 6.16 (began the year at 6.22; 5 years ago it was 5.79)
 
Selected Currencies
€/$ up +0.002 (+0.16%) at 1.155 (YTD: 0.87%; 5YR: -15.5%)
£/€ down +0.002 (-0.21%) at 1.106 (YTD: -0.68%; 5YR: -9.1%)
£/$ down -0.001 (-0.05%) at 1.277 (YTD: 0.19%; 5YR: -22.5%)
$/¥ down +0.44 (-0.41%) at 107.88 (YTD: -1.65%; 5YR: 3.6%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.55 (-0.91%) at 59.99 (YTD: 12.83%; 5YR: -44.0%)
WTI Crude ($/bbl) down +2.58 (+5.18%) at 52.36 (YTD: 15.30%; 5YR: -42.9%)
Gold ($/ozt) up +2.67 (+0.21%) at 1296.26 (YTD: 1.08%; 5YR: 3.8%)
Copper ($/mt) up +52.00 (+0.88%) at 5958.00 (YTD: -0.12%; 5YR: -17.4%)
 
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