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2 October 2019

02/10/2019

Market Data and Morning Chat

Morning Chat 

Factory orders didn’t produce: After an initially positive outlook yesterday, US & European equity markets quickly slid into the red.  The trigger was release of the ISM US manufacturing PMI which came in at 47.8 versus the 50.0 expected and the lowest level for ten years. So instead of rising from last month’s 49.1 it fell – ouch!  But wait, The ISM new orders index – usually the harbinger of weakness for pessimists – improved! What’s more, Markit’s US manufacturing survey – which has also moved markets when weak – rallied to 51.1 from 51.0 (prior and expected). Trade tensions mean manufacturing’s subdued, not unconscious.

The rising sum of Japanese data: Japan also saw a decent selection of economic data this week – although their equity market’s been flat. Given the trade situation maybe not so surprising.  Yet consider the releases. Yes, construction output was weak and, thanks to reduced iron & steel output, the highly variable industrial production was lower than expected at -1.2%. However, positively, the unemployment rate fell to 2.2%, the various Japanese Tankan business confidence surveys were all better than expected, and August retail sales rose 4.8% versus the +0.4% forecast. Better employment, confidence and sales - that’s more optimistic isn’t it?

A bit more on last month’s moves: For sterling investors, global equity returns were 1% lower than dollar returns and 1¾% lower than Euro returns, but sector focus had a bigger impact.  Thanks to continued expectations for US Fed rate cuts and a short-lived oil price spike triggered by the Saudi drone strike, financial (+4.4%), energy (+3.7%) and utility (+2.6%) sectors were stars.  Materials (+1.9%) and Industrials (+1.7%) also outperformed.  With growth a concern, the consumer-focussed sectors lagged, with commercial services hit by the fall in Netflix.  Meanwhile, the healthcare sector (-1.2%) suffered significant late-month weakness across numerous speculative bio-techs. 
  
Stock futures pointing down in advance of US ADP jobs data with only a low 140,000 expected
Ferguson (+4.2%) constructs a decent 7.2% year-on-year profit increase as margins improve
Hargreaves Lansdown (-3.5%) short of fund flow targets as Woodford problems hit home
Charles Schwab’s (-9.7%) planned significant reduction of US trading fees hits online brokers 
… with E-Trade (-16.4%), TD Ameritrade (-25.8%) and Interactive Brokers (-9.4%) all down

Market Data


Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -10.78 (-0.84%) at 1,264 (YTD: 16.71%; 5YR: 52.7%)
MSCI AC World Equities (USD) down -90.48 (-0.99%) at 9,092 (YTD: 16.98%; 5YR: 46.7%)
Barclays Global Aggregate Bonds down -0.11 (-0.02%) at 509 (YTD: 6.30%; 5YR: 9.9%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -36.49 (-1.23%) at 2,940 (YTD: 17.29%; 5YR: 51.1%)    
NASDAQ down -90.65 (-1.13%) at 7,909 (YTD: 19.19%; 5YR: 78.5%)    
Euro STOXX 50 down -51.20 (-1.43%) at 3,518 (YTD: 17.22%; 5YR: 13.3%)    
FTSE 100 down -47.89 (-0.65%) at 7,360 (YTD: 9.40%; 5YR: 14.2%)    
CAC down -80.16 (-1.41%) at 5,598 (YTD: 18.33%; 5YR: 31.9%)    
DAX down -164.25 (-1.32%) at 12,264 (YTD: 16.15%; 5YR: 33.4%)    
Nikkei 225  down -106.63 (-0.49%) at 21,779 (YTD: 8.81%; 5YR: 39.1%)    
Hang Seng down -59.18 (-0.23%) at 26,033 (YTD: 0.73%; 5YR: 13.5%)    
MSCI Emerging Markets down -2.51 (-0.25%) at 998 (YTD: 3.39%; 5YR: 0.6%)    
    
Selected Government Bond Yields    
US 2 Year up +0.01 at 1.56 (began the year at 2.49; 5 years ago it was 0.52)    
US 10 Year up +0.03 at 1.66 (began the year at 2.68; 5 years ago it was 2.43)    
UK 10 Year down -0.02 at 0.47 (began the year at 1.28; 5 years ago it was 2.33)    
Germany 10 Year up +0.03 at -0.54 (began the year at 0.24; 5 years ago it was 0.90)    
France 10 Year up +0.03 at -0.24 (began the year at 0.70; 5 years ago it was 1.25)    
Italy 10 Year up +0.02 at 0.87 (began the year at 2.74; 5 years ago it was 2.32)    
Japan 10 Year down -0.01 at -0.17 (began the year at -0.01; 5 years ago it was 0.52)    
Barclays EM Basket up +0.02 at 5.51 (began the year at 6.22; 5 years ago it was 5.36)
    
Selected Currencies    
$ strengthened +0.0009 versus € (+0.08%) at 1.0929 ($: YTD: 4.57%; 5YR: 13.8%)    
€ strengthened +0.0038 versus £ (-0.34%) at 1.1224 (€: YTD: -0.84%; 5YR: 13.5%)    
$ strengthened +0.0052 versus £ (+0.42%) at 1.2266 ($: YTD: 3.77%; 5YR: 24.0%)    
¥ weakened -0.1400 versus $ (-0.13%) at 107.8300 (¥: YTD: -1.70%; 5YR: 0.4%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.14 (+0.24%) at 59.62 (YTD: 12.13%; 5YR: -35.8%)    
WTI Crude ($/bbl) down -0.45 (-0.83%) at 53.62 (YTD: 18.08%; 5YR: -40.9%)    
Gold ($/ozt) down -4.34 (-0.29%) at 1474.76 (YTD: 15.00%; 5YR: 21.4%)    
Copper ($/mt) down -39.00 (-0.68%) at 5686.00 (YTD: -4.68%; 5YR: -14.9%)    
    
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