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26 October 2018

26/10/2018

Morning Chat & Market Data

Morning Chat

What a difference a day makes: US and European markets rallied yesterday with the S&P +1.9%  Nasdaq +3.0% and EuroStoxx 50 +1.1%, The rebound came alongside European Central Bank President Mario Draghi's comments that he continues to see “broadly balanced” risks, and that rising wages are “a very comforting sign” – although most of us would say that.  Add a decent quarter of US corporate earnings – despite tech stocks – following the best back-to-back quarters since 2009, equity valuations that are only just above fair value and construction and services confidence data still signalling growth shows equities remain attractive.

Covering from A to Z: Unfortunately Alphabet (Google) and Amazon, despite earnings beating expectations, will temper short-term sentiment as they fell 7.4% and 3.8% on aftermarket trading  (net on the day -0.3% and +0.5%) respectively. After good numbers from Twitter and ServiceNow, Alphabet and Amazon were eagerly anticipated. Both rallied before their aftermarket announcements, up 7.1% and 4.3% respectively.  But Alphabet said the strong dollar cut revenues and Amazon, still on a 180x Price/Earnings ratio, missed on revenue growth, had only in-line Amazon Web Services numbers and gave weak guidance for the Christmas quarter on wage hikes.

Holy mackerel:  Michael Gove introduced the Government's new Fisheries Bill to Parliament yesterday setting out the post-Brexit plans to run the UK's maritime Exclusive Economic Zone (EEZ) outside of the EU Common Fisheries Policy and ending automatic fishing rights for EU vessels. Moreover, unlike the Irish border, the substantially larger area of the EEZ borders seven European neighbours. Presently EU fishermen land over 50% of the £1.6 billion UK EEZ catch and far more than the £100 million catch UK fishermen take from EU waters. Funnily enough, the EU want continued access in any trade deal, which sounds fishy to me.

Market Data

Selected Global Aggregates (Total returns, unhedged)

MSCI AC World Equities (Local) up +9.50 (+0.84%) at 1,141 (YTD: -2.27%; 5YR: 50.2%)
MSCI AC World Equities (USD) up +72.64 (+0.89%) at 8,243 (YTD: -2.63%; 5YR: 41.3%)
Barclays Global Aggregate Bonds down -0.27 (-0.06%) at 469 (YTD: -3.20%; 5YR: 1.4%) 

Selected Equity Indices

S&P 500 up +49.47 (+1.86%) at 2,706 (YTD: 1.20%; 5YR: 53.7%)
NASDAQ up +209.94 (+2.95%) at 7,318 (YTD: 6.01%; 5YR: 85.6%)
Euro STOXX 50 up +34.07 (+1.09%) at 3,164 (YTD: -9.69%; 5YR: 4.3%)
FTSE 100 up +41.12 (+0.59%) at 7,004 (YTD: -8.89%; 5YR: 4.2%)
CAC 40 up +79.21 (+1.60%) at 5,032 (YTD: -5.28%; 5YR: 17.8%)
DAX up +115.49 (+1.03%) at 11,307 (YTD: -12.47%; 5YR: 25.8%)
Nikkei 225  down -84.13 (-0.40%) at 21,185 (YTD: -6.94%; 5YR: 50.4%)
Hang Seng down -260.28 (-1.04%) at 24,734 (YTD: -17.33%; 5YR: 9.0%)
MSCI Emerging Markets down -4.09 (-0.43%) at 949 (YTD: -18.08%; 5YR: -7.6%)

Selected Government Bond Yields

US 10 Year down -0.02 at 3.10 (began the year at 2.41; 5 years ago it was 2.51)
US 2 Year down -0.02 at 2.83 (began the year at 1.88; 5 years ago it was 0.30)
UK 10 Year down -0.02 at 1.44 (began the year at 1.19; 5 years ago it was 2.61)
Germany 10 Year down -0.03 at 0.38 (began the year at 0.42; 5 years ago it was 1.76)
France 10 Year down -0.02 at 0.75 (began the year at 0.78; 5 years ago it was 2.25)
Italy 10 Year down -0.04 at 3.50 (began the year at 2.01; 5 years ago it was 4.22)
Japan 10 Year down -0.02 at 0.11 (began the year at 0.04; 5 years ago it was 0.61)
Barclays EM Basket down 0.00 at 6.11 (began the year at 5.49; 5 years ago it was 5.39) 

Selected Currencies

€/$ down 0.000 (-0.01%) at 1.137 (YTD: -5.42%; 5YR: -17.6%)
£/€ down +0.000 (-0.02%) at 1.127 (YTD: 0.21%; 5YR: -3.9%)
£/$ down 0.000 (-0.03%) at 1.282 (YTD: -5.21%; 5YR: -20.7%)
$/¥ down +0.41 (-0.37%) at 112.19 (YTD: -0.35%; 5YR: 13.1%) 

Selected Commodities

Brent Crude ($/bbl) up -0.25 (-0.33%) at 75.89 (YTD: 13.57%; 5YR: -29.3%)
WTI Crude ($/bbl) up +0.56 (+0.84%) at 67.33 (YTD: 11.44%; 5YR: -31.0%)
Gold ($/ozt) up +0.56 (+0.05%) at 1232.75 (YTD: -5.40%; 5YR: -8.7%)
Copper ($/mt) up +47.00 (+0.76%) at 6226.00 (YTD: -14.09%; 5YR: -13.3%)

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