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18 June 2019

18/06/2019

Market Data and Morning Chat

Morning Chat

So much for an empire state of mind: In New York, concrete jungle where dreams are made of – and the state beyond – saw the Empire State manufacturing index tumble by 26.4 from +17.8 to -8.6. Significant? Well, analyst expected a score of +10, and this was the first negative score in two years. Moreover, driven by expectations of lower new orders & employment and slower shipments within six months, the decline was the biggest one-month fall in the index going back to 2001, so it’s significant, but not yet dire. It is, though, a signal to sort the tariff war.

Of course, it’s not all bad news: The US Federal Open Market Committee, the Federal Reserve’s rate-setting body, start their meeting today and announce any rate change tomorrow. The current probability for a cut is sitting at 20% – up from about 18% last week – so still not the expected course of action. However, the combination of weaker economic data, including Empire State manufacturing, has pushed the probability of a quarter-point cut in July to 68% and a half-point cut to 16%. The expectation of rates holding steady by July has dropped from 19.2% to 15.5% and only 4.8% by September.

So that’s why markets moved up: Before about 2008, news of a rate cut would spark concern of an accelerated economic slow-down and in turn an equity sell-off. But indices were up 0.1% to 0.5% yesterday (bar the DAX thanks to a profit warning causing turbulence and knocking Lufthansa shares 12%). The reason is the cause for the cut; a panic/reaction to … the R-word (recession) is what triggers the sell-off. A cut to be a bit more precautionary implies a soft patch but sustained growth and a rally. The markets are implying the cut is precautionary and growth continues.


Huawei’s international handset sales dialled back by 40% following US restrictions
Sacré bleu, Sotheby’s has been bought by French billionaire Patrick Drahi for $3.7billion
Savills survey finds 1-in-8 workers think hot-desking makes them more productive, but 4-in-8 less.

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +0.28 (+0.02%) at 1,236 (YTD: 14.09%; 5YR: 47.9%)
MSCI AC World Equities (USD) down -0.25 (0.00%) at 8,917 (YTD: 14.73%; 5YR: 38.9%)
Barclays Global Aggregate Bonds down -0.35 (-0.07%) at 499 (YTD: 4.09%; 5YR: 5.8%)

Selected Equity Indices (Capital returns)
S&P 500 up +2.69 (+0.09%) at 2,890 (YTD: 15.27%; 5YR: 47.7%)
NASDAQ up +48.37 (+0.62%) at 7,845 (YTD: 18.23%; 5YR: 79.8%)
Euro STOXX 50 up +4.02 (+0.12%) at 3,383 (YTD: 12.72%; 5YR: 3.2%)
FTSE 100 up +11.53 (+0.16%) at 7,357 (YTD: 9.35%; 5YR: 8.5%)
CAC 40 up +23.33 (+0.43%) at 5,391 (YTD: 13.96%; 5YR: 19.0%)
DAX down -10.58 (-0.09%) at 12,086 (YTD: 14.46%; 5YR: 21.7%)
Nikkei 225 down -151.29 (-0.72%) at 20,973 (YTD: 4.79%; 5YR: 38.7%)
Hang Seng up +306.52 (+1.13%) at 27,534 (YTD: 6.53%; 5YR: 18.8%)
MSCI Emerging Markets down -4.11 (-0.40%) at 1,011 (YTD: 4.68%; 5YR: -3.2%)

Selected Government Bond Yields
US 10 Year down -0.02 at 2.07 (began the year at 2.68; 5 years ago it was 2.58)
US 2 Year down -0.02 at 1.85 (began the year at 2.49; 5 years ago it was 0.44)
UK 10 Year up +0.00 at 0.85 (began the year at 1.28; 5 years ago it was 2.74)
Germany 10 Year down -0.01 at -0.25 (began the year at 0.24; 5 years ago it was 1.37)
France 10 Year down -0.01 at 0.09 (began the year at 0.70; 5 years ago it was 1.85)
Italy 10 Year down -0.01 at 2.29 (began the year at 2.74; 5 years ago it was 2.86)
Japan 10 Year down 0.00 at -0.13 (began the year at -0.01; 5 years ago it was 0.60)
Barclays EM Basket down 0.00 at 6.02 (began the year at 6.22; 5 years ago it was 5.33)

Selected Currencies
$ weakened -0.0006 versus € (-0.05%) at 1.1232 ($: YTD: 1.92%; 5YR: 17.3%)
€ strengthened +0.0019 versus £ (-0.17%) at 1.1165 (€: YTD: -0.31%; 5YR: 11.8%)
$ strengthened +0.0018 versus £ (+0.14%) at 1.2540 ($: YTD: 1.62%; 5YR: 26.0%)
¥ strengthened +0.3100 versus $ (+0.29%) at 108.2600 (¥: YTD: -1.29%; 5YR: -5.6%)

Selected Commodities
Brent Crude ($/bbl) down -0.32 (-0.52%) at 60.85 (YTD: 14.44%; 5YR: -46.7%)
WTI Crude ($/bbl) down -0.58 (-1.10%) at 51.93 (YTD: 14.36%; 5YR: -51.2%)
Gold ($/ozt) up +6.83 (+0.51%) at 1346.47 (YTD: 4.99%; 5YR: 5.4%)
Copper ($/mt) up +23.00 (+0.40%) at 5845.00 (YTD: -2.01%; 5YR: -12.8%)

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