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12 July 2019

12/07/2019

Market Data and Morning Chat

Morning Chat

Who’s letting whom down? Markets were having a nice little day yesterday. The FTSE100, DAX, CAC, MIB, the Asian indices, the S&P500 all started out with a positive turn. Bond yields were down, the pound/dollar rate was steady, gold was up, the sun was shining, bliss. Then along comes Donald Trump, tweeting as he goes and complaining that China was “letting us down” (the US, them us not us us) over purchases of agricultural goods. Equities then sold off (OK, not Asia, Asia was closed by then), bond yields rose, the dollar weakened, and I think it got cloudier too.

Au-kay, what about Gold? Through early-June 2019 had not really been Gold’s year. It started 2019 around $1,280/ounce and by late-May was… $1,280/ounce. Yes, there were lofty heights of $1,340 mid-February, but those gains quickly lost their lustre. In sterling terms? The pound started January around $1.27 and by late-May was … $1.27. No change there. However, after Jerome Powell’s June 3rdcomments gilded the rate cut chances, gold started to gleam, hitting $1,425 (even more intraday). The recent statement helped push gold back into those lofty heights – even in sterling terms – at least until the inflation data came out.

Uh, inflation data? The US consumer price (CPI) data came out at 1:30 our time. Frustratingly, CPI was up 0.1% when expected to only be 0.0%, yeah, not much I know. But CPI excluding food & energy – the measure of the underlying, core inflation of the economy – came in at 2.1% rather than 2.0% - another narrow miss but in the wrong direction. If inflation moves above 2.0%, then the impetus for a July rate hike lessens hurting markets. Luckily, Trump didn’t let us down, withdrawing a proposal to eliminate drug rebates thus boosting health care stocks and the index.

Cigna (+9%), United Health (+6%) and CVS Health (+5%) all leapt on the drugs rebate news
Oh, I forgot to mention Amgen and Novartis fell after discontinuing an alzheimer’s trial
Reckitt Benckiser shares rally 2.5% as £1.1billion US opioid deal settles investor pains
… meanwhile, Indivior, the ex-subsidiary that caused the wound sees shares higher
Barratt Developments builds a strong 5.2% gain on expectations of record profits
… while Ocado delivers less on guidance than hoped for after warehouse fire hits capacity

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +1.94 (+0.15%) at 1,278 (YTD: 17.98%; 5YR: 53.1%)
MSCI AC World Equities (USD) up +17.71 (+0.19%) at 9,240 (YTD: 18.89%; 5YR: 44.0%)
Barclays Global Aggregate Bonds down -0.58 (-0.11%) at 502 (YTD: 4.89%; 5YR: 5.6%)

Selected Equity Indices (Capital returns)
S&P 500 up +6.84 (+0.23%) at 3,000 (YTD: 19.67%; 5YR: 52.5%)
NASDAQ down -6.49 (-0.08%) at 8,196 (YTD: 23.52%; 5YR: 85.6%)
Euro STOXX 50 down -4.79 (-0.14%) at 3,497 (YTD: 16.50%; 5YR: 10.8%)
FTSE 100 down -20.87 (-0.28%) at 7,510 (YTD: 11.62%; 5YR: 12.3%)
CAC 40 down -15.64 (-0.28%) at 5,552 (YTD: 17.36%; 5YR: 28.6%)
DAX down -41.29 (-0.33%) at 12,332 (YTD: 16.79%; 5YR: 27.6%)
Nikkei 225 up +110.05 (+0.51%) at 21,644 (YTD: 8.14%; 5YR: 42.7%)
Hang Seng up +227.11 (+0.81%) at 28,432 (YTD: 10.01%; 5YR: 22.4%)
MSCI Emerging Markets up +6.20 (+0.59%) at 1,055 (YTD: 9.25%; 5YR: -0.3%)

Selected Government Bond Yields
US 10 Year up +0.06 at 2.12 (began the year at 2.68; 5 years ago it was 2.52)
US 2 Year up +0.02 at 1.85 (began the year at 2.50; 5 years ago it was 0.45)
UK 10 Year up +0.07 at 0.83 (began the year at 1.27; 5 years ago it was 2.60)
Germany 10 Year up +0.03 at -0.27 (began the year at 0.24; 5 years ago it was 1.21)
France 10 Year up +0.02 at 0.01 (began the year at 0.71; 5 years ago it was 1.53)
Italy 10 Year down -0.03 at 1.70 (began the year at 2.75; 5 years ago it was 2.79)
Japan 10 Year down -0.01 at -0.15 (began the year at -0.01; 5 years ago it was 0.53)
Barclays EM Basket up +0.02 at 4.83 (began the year at 5.98; 5 years ago it was 4.59)

Selected Currencies
$ weakened +0.0002 versus € (+0.02%) at 1.1253 ($: YTD: -1.56%; 5YR: -17.3%)
€ weakened +0.0036 versus £ (+0.32%) at 1.1141 (€: YTD: 0.00%; 5YR: -11.4%)
$ weakened +0.0043 versus £ (+0.34%) at 1.2538 ($: YTD: -1.56%; 5YR: -26.7%)
¥ strengthened -0.2150 versus $ (-0.20%) at 108.3350 (¥: YTD: -1.26%; 5YR: 6.9%)

Selected Commodities
Brent Crude ($/bbl) down -0.53 (-0.79%) at 66.49 (YTD: 31.48%; 5YR: -38.7%)
WTI Crude ($/bbl) down -0.23 (-0.38%) at 60.20 (YTD: 33.33%; 5YR: -40.3%)
Gold ($/ozt) up +5.45 (+0.39%) at 1413.75 (YTD: 10.54%; 5YR: 5.9%)
Copper ($/mt) up +62.50 (+1.07%) at 5925.00 (YTD: -0.67%; 5YR: -17.1%)

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