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29 October 2018

29/10/2018

Morning Chat & Market Data

Morning Chat

So it was a bad week, right?: Markets fell last week, but probably less than many think. The FTSE 100 was only down 1.56%, France’s CAC -2.31%, Germany’s DAX -3.06%, the S&P -3.94% and Japan’s Topix -5.72%. Not great and taking most markets back to about the April low when President Trump’s China tariffs were the only topic in town. Yet US company earnings since April are up 11.8% (rolling year) and are still increasing this quarter while at all-time highs elsewhere. Global growth is much the same, employment higher, and corporate margins have improved since then too.

Halloween is scary enough: Chancellor Philip Hammond will deliver the 2018 budget at 3:30pm today (moved from Wednesday because of halloween), and he is under pressure to show austerity is ending, perhaps by reversing some of the £15 billion of benefits cuts.  Public pay will likely be a key factor, possibly with a regional twist. Taxes could rise, but in a subtle way, such as freezing personal allowance increases, allowing fuel duty to rise, curbing pension relief or increasing capital gains tax.  Oh, and he must find £1 billion to keep the DUP sweet for a ghost of chance of success.

Assessin’ a Hessian blessin’: Chancellor Angela Merkel’s CDU party can breath again.  Fresh from a stinging Bavarian election, the party’s decline in Hesse’s Sunday election, while punishing, was better than feared with 27.0% of the vote.  The left-wing SPD, Merkel’s national coalition partners, saw their vote fall from 30.7% to 19.8%.  The “Green wave” nearly doubled the centre-left Greens share to 19.8% while the populist AfD will enter the Hessian Landtag (Parliament) for the first time with 13.1%. Overall the better-then-expected results should allow Merkel a sigh of relief and the ruling Hesse coalition to survive.

Market Data

Selected Global Aggregates (Total returns, unhedged)

MSCI AC World Equities (Local) down -14.17 (-1.24%) at 1,127 (YTD: -3.48%; 5YR: 47.4%)
MSCI AC World Equities (USD) down -100.13 (-1.21%) at 8,143 (YTD: -3.82%; 5YR: 39.1%)
Barclays Global Aggregate Bonds up +1.59 (+0.34%) at 471 (YTD: -2.87%; 5YR: 1.9%)

Selected Equity Indices

S&P 500 down -46.88 (-1.73%) at 2,659 (YTD: -0.56%; 5YR: 50.0%)
NASDAQ down -151.12 (-2.07%) at 7,167 (YTD: 3.82%; 5YR: 81.3%)
Euro STOXX 50 down -29.51 (-0.93%) at 3,135 (YTD: -10.53%; 5YR: 2.8%)
FTSE 100 down -64.54 (-0.92%) at 6,940 (YTD: -9.73%; 5YR: 2.4%)
CAC 40 down -64.93 (-1.29%) at 4,967 (YTD: -6.50%; 5YR: 16.1%)
DAX down -106.50 (-0.94%) at 11,201 (YTD: -13.29%; 5YR: 24.1%)
Nikkei 225  down -34.80 (-0.16%) at 21,150 (YTD: -7.09%; 5YR: 47.6%)
Hang Seng up +43.29 (+0.18%) at 24,761 (YTD: -17.24%; 5YR: 8.4%)
MSCI Emerging Markets down -9.41 (-0.99%) at 940 (YTD: -18.90%; 5YR: -9.4%)

Selected Government Bond Yields

US 10 Year down 0.00 at 3.07 (began the year at 2.41; 5 years ago it was 2.50)
US 2 Year unchanged at 2.81 (began the year at 1.88; 5 years ago it was 0.31)
UK 10 Year down -0.06 at 1.38 (began the year at 1.19; 5 years ago it was 2.60)
Germany 10 Year down -0.05 at 0.36 (began the year at 0.42; 5 years ago it was 1.74)
France 10 Year down -0.04 at 0.74 (began the year at 0.78; 5 years ago it was 2.22)
Italy 10 Year down -0.20 at 3.34 (began the year at 2.01; 5 years ago it was 4.14)
Japan 10 Year down -0.03 at 0.10 (began the year at 0.04; 5 years ago it was 0.61)
Barclays EM Basket down -0.01 at 6.10 (began the year at 5.49; 5 years ago it was 5.41)

Selected Currencies

€/$ down +0.001 (+0.07%) at 1.140 (YTD: -5.14%; 5YR: -17.0%)
£/€ down +0.000 (-0.02%) at 1.126 (YTD: 0.07%; 5YR: -3.6%)
£/$ down +0.001 (+0.06%) at 1.284 (YTD: -5.07%; 5YR: -19.9%)
$/¥ down +0.01 (-0.01%) at 111.94 (YTD: -0.57%; 5YR: 12.3%)

Selected Commodities

Brent Crude ($/bbl) up -0.58 (-0.75%) at 76.68 (YTD: 14.76%; 5YR: -29.7%)
WTI Crude ($/bbl) up +0.26 (+0.39%) at 67.59 (YTD: 11.87%; 5YR: -30.7%)
Gold ($/ozt) up -2.26 (-0.18%) at 1230.87 (YTD: -5.54%; 5YR: -8.5%)
Copper ($/mt) down -66.00 (-1.06%) at 6160.00 (YTD: -15.00%; 5YR: -14.3%)

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