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3 July 2019

03/07/2019

Market Data and Morning Chat

Morning Chat

Shouldn’t oil float, not sink: Well, unless on a methane sea. As for oil prices, after sinking in May, they gushed back from $60/$52 to $65/$60 a barrel for Brent & West Texas Intermediate (WTI) respectively on OPEC’s intention to maintain supply cuts. Monday’s host of weaker manufacturing purchasing manager reports started the price falling again, and although there was enough early gain to offset the decline Monday there was no such luck yesterday as Brent price slid $3 and WTI about $1. Consequentially, US energy stocks populated the laggard side of the S&P500 tempering the S&P500’s 0.6% gain.

Testing reality: Sci-fi writer Philip K Dick wrote “It is sometimes an appropriate response to reality to go insane”, but 0.03% on a 20-year loan? Yet that’s the German 20-year yield now. Indeed, every bond shorter-dated than that charges you for the pleasure of loaning money to the government. Germany may be one of the extreme cases, but yields have been falling sharply of late. The US 10-year, having been at 3.2% late-2018 is today back below 2%. The trigger? A threat of US tariffs against EU olives and whiskey (and more) over a long-run Boeing-Airbus dispute hitting growth expectations.

Was the vichyssoise as cold as the reception? EU leaders really made a meal of choosing the senior EU nominees. They’ve put a fork in Timmermans and Weber. Instead German Minister of Defense Ursula von der Leyen found favour for Commission President – except from fellow Germans! To make her more palatable, IMF director Christine Lagarde was added to the order for ECB President but only as a 2-for-1 with Ursula (thus also filling the female quota and taking EU Competition minister Margrethe Vestager off the menu). Rounding out the bill is Belgian liberal Prime Minister Charles Michel for Council President.

Spain’s Josep Borrell is the proposed EU Foreign policy chief, but no Parliament President as yet
Ursula von der Leyen is another true Europhile believing in building a United States of Europe
UK 10-year gilt fell to a 33-month low 0.721% yield, yet the FTSE100 closed at an 11-month high
The US IBD economic optimism index more than a glass-half-full in June, rising to 56.6 from 53.2
Broadcom appears to be trying to secure Symantec – Symantec shares were up 22% afterhours
The UK Markit Construction shows a weak foundation at 43.1 well off the not-great 49.2 forecast

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +4.17 (+0.33%) at 1,274 (YTD: 17.63%; 5YR: 50.4%)
MSCI AC World Equities (USD) up +26.67 (+0.29%) at 9,207 (YTD: 18.47%; 5YR: 41.2%)
Barclays Global Aggregate Bonds up +0.57 (+0.11%) at 505 (YTD: 5.44%; 5YR: 6.7%)

Selected Equity Indices (Capital returns)
S&P 500 up +8.68 (+0.29%) at 2,973 (YTD: 18.60%; 5YR: 49.7%)
NASDAQ up +17.93 (+0.22%) at 8,109 (YTD: 22.21%; 5YR: 80.8%)
Euro STOXX 50 up +10.39 (+0.30%) at 3,508 (YTD: 16.88%; 5YR: 6.6%)
FTSE 100 up +61.69 (+0.82%) at 7,559 (YTD: 12.35%; 5YR: 10.1%)
CAC 40 up +8.91 (+0.16%) at 5,577 (YTD: 17.89%; 5YR: 24.2%)
DAX up +5.34 (+0.04%) at 12,527 (YTD: 18.64%; 5YR: 24.9%)
Nikkei 225 down -116.11 (-0.53%) at 21,638 (YTD: 8.11%; 5YR: 41.0%)
Hang Seng down -92.30 (-0.32%) at 28,783 (YTD: 11.37%; 5YR: 22.3%)
MSCI Emerging Markets down -0.44 (-0.04%) at 1,064 (YTD: 10.13%; 5YR: 0.1%)

Selected Government Bond Yields
US 10 Year down -0.03 at 1.94 (began the year at 2.68; 5 years ago it was 2.64)
US 2 Year down -0.03 at 1.73 (began the year at 2.49; 5 years ago it was 0.51)
UK 10 Year down -0.09 at 0.72 (began the year at 1.28; 5 years ago it was 2.75)
Germany 10 Year up +0.01 at -0.36 (began the year at 0.24; 5 years ago it was 1.29)
France 10 Year up +0.01 at -0.05 (began the year at 0.70; 5 years ago it was 1.72)
Italy 10 Year up +0.05 at 1.89 (began the year at 2.74; 5 years ago it was 2.84)
Japan 10 Year unchanged at -0.15 (began the year at -0.01; 5 years ago it was 0.56)
Barclays EM Basket down -0.02 at 5.85 (began the year at 6.22; 5 years ago it was 5.31)

Selected Currencies
$ strengthened +0.0021 versus € (+0.19%) at 1.1286 ($: YTD: 1.45%; 5YR: 17.0%)
€ strengthened +0.0015 versus £ (-0.13%) at 1.1142 (€: YTD: -0.11%; 5YR: 13.1%)
$ strengthened +0.0041 versus £ (+0.33%) at 1.2574 ($: YTD: 1.35%; 5YR: 26.7%)
¥ strengthened +0.2600 versus $ (+0.24%) at 107.6200 (¥: YTD: -1.90%; 5YR: -5.0%)

Selected Commodities
Brent Crude ($/bbl) up +0.26 (+0.42%) at 62.38 (YTD: 17.32%; 5YR: -43.3%)
WTI Crude ($/bbl) down -2.84 (-4.81%) at 56.25 (YTD: 23.87%; 5YR: -46.2%)
Gold ($/ozt) up +7.27 (+0.51%) at 1425.93 (YTD: 11.19%; 5YR: 8.1%)
Copper ($/mt) down -67.50 (-1.13%) at 5887.00 (YTD: -1.31%; 5YR: -17.4%)

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

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros