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8 July 2019

08/07/2019

Market Data and Morning Chat

Morning Chat

So, a strong jobs report – great news, eh? The US non-farm payrolls came in at +224,000 new jobs – nearly 60,000 better than expected, or just under a standard deviation more. Great. Last month’s weak number was revised down slightly, but looks more an anomaly than a trend. So, equities must love that right? No. Equities saw red, with major markets falling anywhere from 0.2 to 0.7%. That might appear counter-intuitive, but the jobs number dampened the expectation of a Fed rate cut and at the moment, the rate cut is seen as the best counter to an extended trade war.

Markets expect a JOLTS next week, among other things: Markets are focused on US rates. Next week offers a bit more clarity as the Fed issues their minutes – as will the European Central Bank. After the strong employment data, the US job openings or JOLTS report will be scrutinised for weakness – expect c7.4million, with less boosting rate cut probabilities. We’ll get the Office of National Statistics’ monthly GDP, expected at +0.3%, plus industrial & manufacturing production – which will be jumped on for any indication of Brexit weakness. We’ll also get German production and Chines trade data. Won’t that be fun.

Less bank for your buck (or Euro): Deutsche Bank has had its woes. £5½billion in fines from the sub-prime debacle, £2billion in respect of possible rate rigging and more again over allegations of money laundering. Last year, their credit default swaps – sort of insurance over paying their debt interest – were heading into Lehman’s territory, and this year an abortive merger with Commerzbank driven, at least by appearances, out of desperation. Now, they face a radical £6.6billion overhaul that will see the bank exit equity trading and cull 18,000 employees – about a fifth overall – over three years to try to regain profitability.

Asian stocks start the week in the red over that pesky jobs report – imagine, more people working!
Greece’s opposition conservatives led by Kyriakos Mitsotakis to wins election with overall majority
Undiplomatic memos about the White House by UK’s US ambassador saw the light of day …oops
Turkish holidays a bit cheaper as Lira falls after President Erdogan dismissed central bank governor

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -2.86 (-0.22%) at 1,280 (YTD: 18.12%; 5YR: 52.8%)
MSCI AC World Equities (USD) down -39.62 (-0.43%) at 9,239 (YTD: 18.88%; 5YR: 43.5%)
Barclays Global Aggregate Bonds down -3.05 (-0.60%) at 504 (YTD: 5.14%; 5YR: 6.0%)

Selected Equity Indices (Capital returns)
S&P 500 down -5.41 (-0.18%) at 2,990 (YTD: 19.29%; 5YR: 52.3%)
NASDAQ down -8.44 (-0.10%) at 8,162 (YTD: 23.01%; 5YR: 85.9%)
Euro STOXX 50 down -16.17 (-0.46%) at 3,528 (YTD: 17.54%; 5YR: 10.8%)
FTSE 100 down -50.44 (-0.66%) at 7,553 (YTD: 12.26%; 5YR: 12.1%)
CAC 40 down -27.01 (-0.48%) at 5,594 (YTD: 18.24%; 5YR: 28.8%)
DAX down -61.37 (-0.49%) at 12,569 (YTD: 19.03%; 5YR: 28.6%)
Nikkei 225 down -212.03 (-0.98%) at 21,534 (YTD: 7.59%; 5YR: 40.6%)
Hang Seng down -514.05 (-1.79%) at 28,261 (YTD: 9.34%; 5YR: 20.0%)
MSCI Emerging Markets down -4.70 (-0.44%) at 1,060 (YTD: 9.75%; 5YR: -0.5%)

Selected Government Bond Yields
US 10 Year down -0.02 at 2.01 (began the year at 2.68; 5 years ago it was 2.56)
US 2 Year down -0.02 at 1.84 (began the year at 2.49; 5 years ago it was 0.50)
UK 10 Year up +0.06 at 0.74 (began the year at 1.28; 5 years ago it was 2.65)
Germany 10 Year up +0.00 at -0.36 (began the year at 0.24; 5 years ago it was 1.22)
France 10 Year up +0.04 at -0.05 (began the year at 0.70; 5 years ago it was 1.65)
Italy 10 Year up +0.14 at 1.89 (began the year at 2.74; 5 years ago it was 2.84)
Japan 10 Year up +0.01 at -0.15 (began the year at -0.01; 5 years ago it was 0.55)
Barclays EM Basket up +0.01 at 5.84 (began the year at 6.22; 5 years ago it was 5.28)

Selected Currencies
$ weakened -0.0004 versus € (-0.04%) at 1.1223 ($: YTD: 2.00%; 5YR: 17.5%)
€ weakened -0.0013 versus £ (+0.12%) at 1.1163 (€: YTD: -0.30%; 5YR: 12.8%)
$ weakened -0.0017 versus £ (-0.14%) at 1.2528 ($: YTD: 1.71%; 5YR: 26.9%)
¥ strengthened +0.2000 versus $ (+0.18%) at 108.3500 (¥: YTD: -1.21%; 5YR: -6.3%)

Selected Commodities
Brent Crude ($/bbl) down -0.14 (-0.22%) at 64.31 (YTD: 20.95%; 5YR: -40.5%)
WTI Crude ($/bbl) up +1.09 (+1.94%) at 57.34 (YTD: 26.27%; 5YR: -44.9%)
Gold ($/ozt) up +4.11 (+0.29%) at 1403.36 (YTD: 9.43%; 5YR: 6.4%)
Copper ($/mt) down -18.00 (-0.30%) at 5902.00 (YTD: -1.06%; 5YR: -17.5%)

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