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26 July 2019

26/07/2019

Market Data and Morning Chat

Morning Chat

Hmmm, where in Europe is manufacturing very important? Speaking in Frankfurt after the European Central Bank Governing Council meeting, ECB President Mario Draghi noted the outlook for the European economy – although strong – is getting “worse and worse… especially… in those countries where manufacturing is very important”. I’m going to guess – given Wednesday’s weak PMI data – he’s thinking of Germany. Digging through the ECB awkward comment does lead one to suspect Mario Draghi’s farewell present will be further monetary stimulus at his penultimate meeting in September. Given the movements in the Euro and bond yields, the market probably thinks so too.

Gee, thanks Mario: Using the words “significant degree” and the repetition of worse didn’t help the S&P500 get started. The index ended slipping 16 points to close down 0.5%. There was still some good news though. Defence contractor Raytheon (+4.6%) scored hits across the board with strong sales, margins and cash flow. Meanwhile Pharmaco Bristol Myers Squibb (+5.0%) issued an upbeat outlook boosted by the upcoming Celgene merger. Then, after market close, Alphabet (Google) announced a $25billion buyback and fab results to rally 8.5% while Starbucks was sipping pretty up 6.7% as the company had the beans to raise guidance.

Not all clean waves: The market has surfed an incoming tide of green results lately. Many smaller companies continued hanging ten yesterday, but we also saw a few modest wipeouts. Roper (-1.0%) had record revenues but lowering guidance from 4-5% to 4% was all some investors saw. Valero (-3.2%) saw less refined earnings than expected as revenues slipped 6% year-on-year. Comcast‘s (-2.1% over the day) +23.6% year-on-year revenue gains missed by a meagre $220million on $26.86billion – seems a bit of an overreaction. Oh, and Amazon (-2.9% total) saw better-than-expected sales, but a muddied bottom line and gnarly web services growth.

Yes, the summer sunshine beckons, so the Morning Chat will take a short one-week hiatus to allow my vitamin D levels to accumulate – and to give Boris a week to really get going!
The second quarter US GDP data will be released later today – analysts expect +1.7% to 2.0%
3M (-0.7%) taped together better-than-expected results though organic sales were weak
Apple is paying to take a bite out of Intel and buy their modem chip business for a mere $1billion
Compass group (+2.7%) catered for investors with 6.3% organic revenue growth over the quarter
National Express (+3.3%) drove home a record first half £113million profit on organic revenue growth
Anglo American closed unchanged despite hiking its dividend 30% and unveiling a $1billion buyback
Nissan to cut about 9% of global staff as auto market remains in a jam
Spanish PM Sanchez lost the vote to form an acceptable government risking a new election

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -4.87 (-0.38%) at 1,282 (YTD: 18.31%; 5YR: 51.7%)
MSCI AC World Equities (USD) down -45.10 (-0.49%) at 9,249 (YTD: 19.01%; 5YR: 43.1%)
Barclays Global Aggregate Bonds down -0.64 (-0.13%) at 504 (YTD: 5.20%; 5YR: 6.1%)

Selected Equity Indices (Capital returns)
S&P 500 down -15.89 (-0.53%) at 3,004 (YTD: 19.82%; 5YR: 51.8%)
NASDAQ down -82.96 (-1.00%) at 8,239 (YTD: 24.16%; 5YR: 85.2%)
Euro STOXX 50 down -22.75 (-0.64%) at 3,510 (YTD: 16.95%; 5YR: 10.6%)
FTSE 100 down -12.41 (-0.17%) at 7,489 (YTD: 11.31%; 5YR: 10.3%)
CAC 40 down -27.82 (-0.50%) at 5,578 (YTD: 17.91%; 5YR: 28.8%)
DAX down -160.79 (-1.28%) at 12,362 (YTD: 17.08%; 5YR: 28.2%)
Nikkei 225 up +46.98 (+0.22%) at 21,757 (YTD: 8.70%; 5YR: 40.7%)
Hang Seng up +70.26 (+0.25%) at 28,594 (YTD: 10.63%; 5YR: 18.1%)
MSCI Emerging Markets down -1.06 (-0.10%) at 1,054 (YTD: 9.16%; 5YR: -2.3%)

Selected Government Bond Yields
US 10 Year up +0.02 at 2.07 (began the year at 2.68; 5 years ago it was 2.47)
US 2 Year up +0.04 at 1.85 (began the year at 2.50; 5 years ago it was 0.49)
UK 10 Year up +0.02 at 0.70 (began the year at 1.27; 5 years ago it was 2.57)
Germany 10 Year up +0.02 at -0.36 (began the year at 0.24; 5 years ago it was 1.15)
France 10 Year up +0.02 at -0.10 (began the year at 0.71; 5 years ago it was 1.55)
Italy 10 Year up +0.04 at 1.54 (began the year at 2.75; 5 years ago it was 2.62)
Japan 10 Year down 0.00 at -0.15 (began the year at -0.01; 5 years ago it was 0.52)
Barclays EM Basket up +0.00 at 4.77 (began the year at 5.98; 5 years ago it was 4.66)

Selected Currencies
$ weakened +0.0015 versus € (+0.14%) at 1.1159 ($: YTD: -2.39%; 5YR: -16.9%)
€ strengthened -0.0019 versus £ (-0.17%) at 1.1198 (€: YTD: 0.51%; 5YR: -11.4%)
$ strengthened -0.0004 versus £ (-0.03%) at 1.2496 ($: YTD: -1.89%; 5YR: -26.4%)
¥ weakened +0.4850 versus $ (+0.45%) at 108.5500 (¥: YTD: -1.06%; 5YR: 6.6%)

Selected Commodities
Brent Crude ($/bbl) up +0.15 (+0.24%) at 63.44 (YTD: 25.45%; 5YR: -40.9%)
WTI Crude ($/bbl) up +0.08 (+0.14%) at 56.04 (YTD: 24.12%; 5YR: -45.1%)
Gold ($/ozt) down -10.85 (-0.76%) at 1416.10 (YTD: 10.72%; 5YR: 9.4%)
Copper ($/mt) up +30.00 (+0.50%) at 6010.00 (YTD: 0.75%; 5YR: -16.3%)

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