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22 July 2019

22/07/2019

Market Data and Morning Chat

Morning Chat

Not the best of weeks: The main equity indices slipped last week – well except for the FTSE100 which managed a whopping 0.04% gain (still counts as up). For the rest, red. The Chinese CSI300 was the leader, down only 0.02%, the Topix -0.7%, DAX -0.5%, CAC -0.4%, Italian MIB -2.4% (more below) and S&P500 -1.2%. The disappointing thing is that most of the news last week was upbeat – good economic data, recovering Empire Manufacturing in the US, better-then-expected corporate earnings – but that was the problem. It makes the market-assumed certainty of an end-July Fed rate cut less of a certainty.

Oh, and Italy: Guess what, the Italian government’s in a bit of turmoil. There’s substantially increased speculation the relationship between the deputy prime ministers Luigi Di Maio of 5star and Matteo Salvini of Lega Nord has frayed to the point that Salvini will push for an early election. Friday, the speculation knocked 2% off the MIB – led by the banks – and caused the difference or spread in Italian & German bond yields to leap. Yet it’s logical, Salvini’s party is polling near 37%, 14% more than the right-wing Democrat party, and over double 5star. They could control a right-wing government.

…and this week? Good economic data has troubled the equity markets, but politics could also be a driver this week. There’s the Italian situation noted above. The Spanish Socialists are having difficulty forming a coalition and are reaching a deadline. Plus, we find out who’ll lead the Tories and the Lib-Dems. Economically, we get the advance Q2 GDP estimate of US GDP (only +1.8% expected), durable goods orders and new home sales. We’ll also see the Markit flash manufacturing and services PMIs, the European Central Bank will decide on interest rates and we start to get tech sector earnings data.

Iran’s shows crude behaviour seizing the UK-flagged Stena Imperio and raising tensions
Canadian retail sales had a dressing down, falling 0.1% in May on slower clothing & food sales
Centrica will look to cut its massive divided – no shock given its can only cover 30% of it
Regions Financial (+2.3%) were in the right area with earnings as their hedges kept trouble out
Schlumberger’s (-0.03%) $459million free cash flow pumping less than the expected $800million
Card rewards prove a high charge for American Express’ (-2.8%)with expenses up 9.9%
Kansas City Southern (+4.6%) on the express to profits with $1.64 earnings beating estimates

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -1.75 (-0.14%) at 1,273 (YTD: 17.48%; 5YR: 50.7%)
MSCI AC World Equities (USD) down -15.62 (-0.17%) at 9,197 (YTD: 18.33%; 5YR: 42.0%)
Barclays Global Aggregate Bonds up +0.21 (+0.04%) at 505 (YTD: 5.37%; 5YR: 6.2%)

Selected Equity Indices (Capital returns)
S&P 500 down -18.50 (-0.62%) at 2,977 (YTD: 18.74%; 5YR: 50.1%)
NASDAQ down -60.75 (-0.74%) at 8,146 (YTD: 22.78%; 5YR: 82.8%)
Euro STOXX 50 down -2.65 (-0.08%) at 3,480 (YTD: 15.95%; 5YR: 9.1%)
FTSE 100 up +15.61 (+0.21%) at 7,509 (YTD: 11.60%; 5YR: 10.5%)
CAC up +1.79 (+0.03%) at 5,552 (YTD: 17.37%; 5YR: 27.1%)
DAX up +32.22 (+0.26%) at 12,260 (YTD: 16.11%; 5YR: 25.9%)
Nikkei 225 down -50.20 (-0.23%) at 21,417 (YTD: 7.00%; 5YR: 39.6%)
Hang Seng down -234.32 (-0.81%) at 28,531 (YTD: 10.39%; 5YR: 20.0%)
MSCI Emerging Markets up +5.77 (+0.55%) at 1,057 (YTD: 9.50%; 5YR: -1.6%)

Selected Government Bond Yields
US 10 Year up +0.01 at 2.06 (began the year at 2.68; 5 years ago it was 2.46)
US 2 Year up +0.02 at 1.84 (began the year at 2.49; 5 years ago it was 0.47)
UK 10 Year down -0.03 at 0.73 (began the year at 1.28; 5 years ago it was 2.59)
Germany 10 Year up +0.01 at -0.32 (began the year at 0.24; 5 years ago it was 1.17)
France 10 Year up +0.01 at -0.06 (began the year at 0.70; 5 years ago it was 1.57)
Italy 10 Year down -0.01 at 1.60 (began the year at 2.74; 5 years ago it was 2.77)
Japan 10 Year down 0.00 at -0.14 (began the year at -0.01; 5 years ago it was 0.54)
Barclays EM Basket down -0.02 at 5.81 (began the year at 6.22; 5 years ago it was 5.26)

Selected Currencies
$ strengthened +0.0016 versus € (+0.14%) at 1.1213 ($: YTD: 2.09%; 5YR: 16.7%)
€ weakened -0.0008 versus £ (+0.07%) at 1.1143 (€: YTD: -0.12%; 5YR: 13.6%)
$ strengthened +0.0009 versus £ (+0.07%) at 1.2494 ($: YTD: 1.98%; 5YR: 26.7%)
¥ weakened -0.2600 versus $ (-0.24%) at 107.9900 (¥: YTD: -1.55%; 5YR: -6.0%)

Selected Commodities
Brent Crude ($/bbl) up +0.50 (+0.80%) at 62.81 (YTD: 18.13%; 5YR: -40.4%)
WTI Crude ($/bbl) up +0.33 (+0.60%) at 55.63 (YTD: 22.51%; 5YR: -46.1%)
Gold ($/ozt) down -0.10 (-0.01%) at 1425.27 (YTD: 11.14%; 5YR: 9.1%)
Copper ($/mt) up +82.00 (+1.37%) at 6065.00 (YTD: 1.68%; 5YR: -13.2%)

Data sourced from Bloomberg as of the close of last trading day.
YTD = Year-to-date return; 5YR = five year return

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros