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13 June 2019

13/06/2019

Market Data and Morning Chat

Morning Chat

Unseason-oil data: Usually, sometime in May, US crude oil inventories should start to roll over and the winter storage build-up eases. Surprising maybe, but more oil is consumed in the summer than winter as air conditioners are switched on and the “driving season” begins (taking to the road is far more pleasant with the top down than in deep snowdrifts). However, current oil inventories are continuing to accrete – presumably on sluggish demand – as yesterday the American Petroleum Institute reported a further 4.8million barrel build last week. Despite promising OPEC production news, the pesky inventory gain knocked oil prices by 4%.

Tracing through the implications: It’s probably obvious – if oil prices fall, oil sector revenues fall and so too energy stocks – BP fell 3% yesterday, Shell 1% and US energy stocks 1.4%. If lower prices are sustained – as now – then within a few months it should pass through to producer price inflation and in turn consumer inflation (CPI). Sure enough, the just-announced US CPI slipped to 1.8% – below the expected 1.9% – with reduced energy inflation a contributing factor. Lower US inflation increases the probability the Fed might cut rates benefitting the US banking and utility sectors (up 0.6% and 1.3% yesterday).

Well that didn’t work: Wednesday, the pound rallied from the market open on news the Labour party would table a motion potentially leading to a Parliamentary block to any no-deal Brexit outcome. It would have thwarted the possible Halloween Brexit plans of Conservative leadership contenders like Boris Johnson & Andrea Leadsom and made most outcomes more soft-Brexit/no-Brexit friendly. But as voting commenced, the pound, anticipating the outcome, snapped lower, from $1.2729 to $1.2689 – a lower pound implies a higher no-deal Brexit probability – as the motion failed 298 to 309 with 8 Labour MP’s voting against countering the 10 renegade Tories.

More than 75% of landlords support to lease cuts suitable to save Top Shop and Dotty P
Micron (down 5.4%) & other chip-makers crunched by concerns over NAND & DRAM inventories
The S&P held above its just-crossed 50-day moving average – which is usually a positive sign

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -3.67 (-0.30%) at 1,236 (YTD: 14.09%; 5YR: 48.7%)
MSCI AC World Equities (USD) down -22.17 (-0.25%) at 8,929 (YTD: 14.89%; 5YR: 40.0%)
Barclays Global Aggregate Bonds up +0.23 (+0.05%) at 499 (YTD: 4.28%; 5YR: 6.0%)

Selected Equity Indices (Capital returns)
S&P 500 down -5.88 (-0.20%) at 2,880 (YTD: 14.88%; 5YR: 48.7%)
NASDAQ down -29.85 (-0.38%) at 7,793 (YTD: 17.44%; 5YR: 80.8%)
Euro STOXX 50 down -14.47 (-0.43%) at 3,387 (YTD: 12.83%; 5YR: 3.2%)
FTSE 100 down -30.83 (-0.42%) at 7,368 (YTD: 9.50%; 5YR: 8.7%)
CAC 40 down -33.53 (-0.62%) at 5,375 (YTD: 13.62%; 5YR: 18.3%)
DAX down -40.13 (-0.33%) at 12,116 (YTD: 14.74%; 5YR: 22.2%)
Nikkei 225 down -97.72 (-0.46%) at 21,032 (YTD: 5.08%; 5YR: 39.3%)
Hang Seng down -203.74 (-0.75%) at 27,105 (YTD: 4.87%; 5YR: 16.2%)
MSCI Emerging Markets down -5.62 (-0.54%) at 1,026 (YTD: 6.26%; 5YR: -2.2%)

Selected Government Bond Yields
US 10 Year down -0.01 at 2.12 (began the year at 2.68; 5 years ago it was 2.60)
US 2 Year down -0.01 at 1.87 (began the year at 2.49; 5 years ago it was 0.45)
UK 10 Year up +0.01 at 0.87 (began the year at 1.28; 5 years ago it was 2.75)
Germany 10 Year down 0.00 at -0.24 (began the year at 0.24; 5 years ago it was 1.36)
France 10 Year down -0.01 at 0.10 (began the year at 0.70; 5 years ago it was 1.73)
Italy 10 Year down 0.00 at 2.43 (began the year at 2.74; 5 years ago it was 2.77)
Japan 10 Year up +0.00 at -0.12 (began the year at -0.01; 5 years ago it was 0.60)
Barclays EM Basket down -0.03 at 6.06 (began the year at 6.22; 5 years ago it was 5.29)

Selected Currencies
$ strengthened +0.0002 versus € (+0.02%) at 1.1295 ($: YTD: 1.37%; 5YR: 16.5%)
€ weakened -0.0001 versus £ (+0.01%) at 1.1232 (€: YTD: -0.91%; 5YR: 11.6%)
$ strengthened +0.0003 versus £ (+0.02%) at 1.2686 ($: YTD: 0.47%; 5YR: 25.2%)
¥ strengthened +0.1500 versus $ (+0.14%) at 108.3500 (¥: YTD: -1.21%; 5YR: -5.8%)

Selected Commodities
Brent Crude ($/bbl) up +2.53 (+4.17%) at 63.19 (YTD: 18.85%; 5YR: -43.9%)
WTI Crude ($/bbl) down -2.13 (-4.00%) at 51.14 (YTD: 12.62%; 5YR: -52.0%)
Gold ($/ozt) up +2.64 (+0.20%) at 1336.27 (YTD: 4.20%; 5YR: 4.7%)
Copper ($/mt) down -24.00 (-0.41%) at 5852.00 (YTD: -1.89%; 5YR: -11.6%)

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