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28 November 2018

28/11/2018

Morning Chat & Market Data

Morning Chat 


Will Italy budge-it? You think we have problems. Over 2018 to 20 September, Italy’s Milan Bourse generated a sterling total return of niente – nothing. Two months later it’s down 9.8%, nearly 7.5% lower than the FTSE 100.  The decline is driven by the Italian budget dispute and it’s impacting Italian economic confidence.  Business confidence came in at 104.4 – marginally above expectations, but the lowest level for two years and trending lower.  Consumer confidence was only a six month low, but was much lower than anticipated.  Talks continue, but the mooted 2.2% deficit offer is unlikely to shift a resolute Brussels.

Dis-United Tech: Markets appear unimpressed with United Technologies’ long-awaited plan to split into three companies by 2020 with shares down 4.13% yesterday. For starters there is the £2.7billion estimated break-up cost which makes Brexit look cheap.  Then there is the company’s weak cash flow forecasts of the new Collins Aerospace division and planned new company (formed by merging United Tech’s existing Aerospace division with the newly acquired Rockwell Collins). Finally, there is President Trump’s statement signalling increased tariffs against China that hits the other two planned companies – Otis (elevators) and Carrier (building systems).  Divorce isn’t so popular at the moment.

Comparing Apples and…: Apple shares fell 0.21%, while Microsoft rallied 0.69%.  Thus over yesterday they traded back and forth the title of world’s largest company.  But compare their numbers.  Both trade on price to earnings multiples lower than the S&P 500 with Apple’s slightly less expensive.  Microsoft has marginally better operating margins, while Apple’s revenues are a bit more appealing. Compare price to cash flow, to sales, and to book value you have to favour Apple’s juicy numbers.  What’s providing this window for Microsoft is Trump’s bruising tariff war with China. So who was biggest by close of play? Microsoft.

Market Data

Selected Global Aggregates (Total returns, unhedged)

MSCI AC World Equities (Local) up +2.37 (+0.21%) at 1,146 (YTD: -1.84%; 5YR: 47.6%)
MSCI AC World Equities (USD) up +4.02 (+0.05%) at 8,235 (YTD: -2.73%; 5YR: 39.1%)
Barclays Global Aggregate Bonds down -0.75 (-0.16%) at 468 (YTD: -3.41%; 5YR: 2.6%)

Selected Equity Indices
S&P 500 up +8.72 (+0.33%) at 2,682 (YTD: 0.32%; 5YR: 48.4%)
NASDAQ up +0.85 (+0.01%) at 7,083 (YTD: 2.60%; 5YR: 75.1%)
Euro STOXX 50 down -6.29 (-0.20%) at 3,166 (YTD: -9.63%; 5YR: 2.4%)
FTSE 100 down -19.15 (-0.27%) at 7,017 (YTD: -8.73%; 5YR: 5.4%)
CAC 40 down -11.83 (-0.24%) at 4,983 (YTD: -6.20%; 5YR: 15.8%)
DAX down -45.61 (-0.40%) at 11,309 (YTD: -12.45%; 5YR: 20.5%)
Nikkei 225  up +224.62 (+1.02%) at 22,177 (YTD: -2.58%; 5YR: 41.0%)
Hang Seng up +336.61 (+1.28%) at 26,669 (YTD: -10.86%; 5YR: 12.1%)
MSCI Emerging Markets up +3.59 (+0.37%) at 980 (YTD: -15.39%; 5YR: -3.1%)

Selected Government Bond Yields
US 10 Year up +0.01 at 3.06 (began the year at 2.41; 5 years ago it was 2.74)
US 2 Year up +0.00 at 2.84 (began the year at 1.88; 5 years ago it was 0.29)
UK 10 Year down -0.02 at 1.39 (began the year at 1.19; 5 years ago it was 2.74)
Germany 10 Year down -0.06 at 0.35 (began the year at 0.42; 5 years ago it was 1.69)
France 10 Year down -0.05 at 0.73 (began the year at 0.78; 5 years ago it was 2.17)
Italy 10 Year down -0.25 at 3.29 (began the year at 2.01; 5 years ago it was 4.05)
Japan 10 Year down -0.03 at 0.09 (began the year at 0.04; 5 years ago it was 0.60)
Barclays EM Basket down -0.01 at 6.17 (began the year at 5.49; 5 years ago it was 5.66)

Selected Currencies
€/$ down +0.001 (+0.04%) at 1.129 (YTD: -6.09%; 5YR: -17.0%)
£/€ up -0.001 (+0.12%) at 1.130 (YTD: 0.40%; 5YR: -6.4%)
£/$ down +0.002 (+0.13%) at 1.275 (YTD: -5.72%; 5YR: -21.9%)
$/¥ up -0.09 (+0.08%) at 113.87 (YTD: 1.13%; 5YR: 10.2%)

Selected Commodities
Brent Crude ($/bbl) down +0.15 (+0.25%) at 60.55 (YTD: -9.38%; 5YR: -45.8%)
WTI Crude ($/bbl) down -0.07 (-0.14%) at 51.56 (YTD: -14.66%; 5YR: -44.1%)
Gold ($/ozt) down -1.30 (-0.11%) at 1213.70 (YTD: -6.86%; 5YR: -2.4%)
Copper ($/mt) down -67.50 (-1.09%) at 6121.50 (YTD: -15.53%; 5YR: -12.8%)

Data sourced from Bloomberg as of the close of last trading day.
YTD = Year-to-date return; 5YR = five year return
 
SOURCES: BBC; The New York Times; FactSet; Al Jazeera; Financial Times; The Economist; Reuters; CNN; Wall Street Journal; CNBC; Google Finance; Seeking Alpha; The Idea Farm; Bloomberg, Twitter; Wikipedia; Investopedia; The Guardian; The Times of London; Google News; Numerous academic sources and journals; Trade bodies; Government institutions (e.g The Bank of England, The Federal Reserve).

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros