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20 March 2019

20/03/2019

Morning Chat and Market Data

Morning Chat 

Imagine if it wasn’t stifled by Brexit: The forecasts of UK employment data yesterday called for 120,000 more employed, a 4.0% unemployment rate and average weekly earnings up 3.2%. Instead the economy added 222,000 jobs to drop to 3.9% unemployed – it’s not been lower since January 1975 – and wages up 3.4% year-on-year. Moreover, the employment rate, now 76.1%, is a new record high and the “economic inactivity rate” a record low. Businesses may be slowing capital expenditures, but it appears they’re compensating by adding more flexible labour. Continued strength like this could push the Bank of England into raising rates.

Expressing disappointment: FedEx – a trans-Pacific trade bellwether indicator – was expected to post earnings of $3.08 a share after the US market close on $17.6billion of sales. Unfortunately, they posted $3.03 a share on $17.0billion of revenue (still up on the $16.5billion of 2017) leaving shares down 5.38% afterhours. Management noted slowing international macroeconomic conditions and continuing weak global trade growth trends hurt also prompting weaker guidance of $15.10-$15.90 for 2019 versus the $15.97 expected. While the company didn’t perform as hoped, there’s a positive to take in that shipment volumes, revenue per 100lb shipped and revenue per shipment still grew.

The difference between pigs and Pallas: The Chinese eating more pork might make you think pork belly prices are on a tear. Yes, prices have rallied nearly 40% in a month, but they’re actually wildly variable varying between $80-200 per 185lb with 15 swings of $30 or more over 30 months. The Chinese are also buying more palladium as regulators globally push for tighter emission standards (Palladium is used in petrol engine catalytic converters). The price is significantly less volatile but has rallied 133% over the same period over tight supply. Moral? You won’t save your bacon with pork bellies.

Market Data 

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +0.93 (+0.08%) at 1,221 (YTD: 12.74%; 5YR: 55.3%)
MSCI AC World Equities (USD) up +15.26 (+0.17%) at 8,796 (YTD: 13.18%; 5YR: 45.3%)
Barclays Global Aggregate Bonds up +0.21 (+0.04%) at 486 (YTD: 1.53%; 5YR: 5.1%)

Selected Equity Indices (Capital returns)
S&P 500 down -0.37 (-0.01%) at 2,833 (YTD: 12.99%; 5YR: 51.3%)
NASDAQ up +9.47 (+0.12%) at 7,724 (YTD: 16.41%; 5YR: 78.8%)
Euro STOXX 50 up +21.06 (+0.62%) at 3,409 (YTD: 13.58%; 5YR: 10.4%)
FTSE 100 up +24.81 (+0.34%) at 7,324 (YTD: 8.86%; 5YR: 11.9%)
CAC 40 up +13.07 (+0.24%) at 5,426 (YTD: 14.70%; 5YR: 25.4%)
DAX up +131.35 (+1.13%) at 11,788 (YTD: 11.64%; 5YR: 26.8%)
Nikkei 225 up +42.07 (+0.20%) at 21,609 (YTD: 7.96%; 5YR: 51.9%)
Hang Seng down -97.04 (-0.33%) at 29,369 (YTD: 13.63%; 5YR: 38.7%)
MSCI Emerging Markets up +1.69 (+0.16%) at 1,071 (YTD: 10.89%; 5YR: 13.8%)

Selected Government Bond Yields
US 10 Year down -0.01 at 2.60 (began the year at 2.68; 5 years ago it was 2.77)
US 2 Year down -0.01 at 2.46 (began the year at 2.49; 5 years ago it was 0.42)
UK 10 Year down -0.01 at 1.19 (began the year at 1.28; 5 years ago it was 2.77)
Germany 10 Year up +0.00 at 0.10 (began the year at 0.24; 5 years ago it was 1.65)
France 10 Year down 0.00 at 0.46 (began the year at 0.70; 5 years ago it was 2.19)
Italy 10 Year down -0.03 at 2.46 (began the year at 2.74; 5 years ago it was 3.43)
Japan 10 Year unchanged at -0.05 (began the year at -0.01; 5 years ago it was 0.59)
Barclays EM Basket down -0.01 at 6.02 (began the year at 6.22; 5 years ago it was 5.89)

Selected Currencies
$ strengthened +0.0011 versus € (+0.10%) at 1.1343 ($: YTD: 0.95%; 5YR: 17.7%)
€ strengthened +0.0021 versus £ (-0.18%) at 1.1666 (€: YTD: -4.59%; 5YR: 2.7%)
$ strengthened +0.0036 versus £ (+0.27%) at 1.3233 ($: YTD: -3.82%; 5YR: 19.8%)
¥ weakened -0.2400 versus $ (-0.22%) at 111.6100 (¥: YTD: 1.75%; 5YR: -8.2%)

Selected Commodities
Brent Crude ($/bbl) up +0.12 (+0.18%) at 67.44 (YTD: 26.84%; 5YR: -36.4%)
WTI Crude ($/bbl) down -0.06 (-0.10%) at 59.03 (YTD: 29.99%; 5YR: -41.2%)
Gold ($/ozt) down -3.42 (-0.26%) at 1303.14 (YTD: 1.61%; 5YR: -1.9%)
Copper ($/mt) up +34.00 (+0.53%) at 6459.00 (YTD: 8.28%; 5YR: -1.4%)

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