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18 October 2019

18/10/2019

Market Data and Morning Chat

Morning Chat 

A Brexit deal if we’re not DUP’d: Boris Johnson and Jean-Claude Junker announced the UK and EU reached a new divorce deal. Sort of Maydeal 2.0 – transition arrangements, citizens’ rights and, now, £33billion, they’re the same – but there’s a major change. Northern Ireland shifts from being in the EU customs union to the UK customs union albeit subject to various EU rules. It means the UK can enter UK-wide trade agreements and Northern Irish products can be labelled “Product of the UK”. Parliament just needs to ratifiy it but that’s not a dead cert given the DUP are not on board. 

How did the markets react? Initially the pound soared, but the DUP’s defiant stance punctured that bubble somewhat though some of sterling’s rally remained. There had been some enthusiasm in the equity markets but that too evaporated.  By close of business the UK was up only ¼% while European markets generally closed down. France was down by a third of a percent.  At least bond yields remain relatively unmoved. Equities over in the US also gave back some of their gains especially as US industrial output was weaker-than-expected too. However, US indices still closed up thanks to further decent earnings.

So good news on earnings? It’s been a robust earnings season so far. An eighth of the S&P has reported and over three quarters have seen a positive earnings surprise. Consequently, shares have done well.  Netflix translated mixed numbers into a gain. Morgan Stanley (+1.5%), the last major bank reporting, saw their best quarterly revenue in a decade on bond trading. Aerospace firm Honeywell’s shares jetted up 2.4% on forecast-beating earnings and improved guidance.  That’s not bad, though it was not all plain sailing. IBM’s (-5.6%) weak global technology services numbers and RedHat acquisition accounting problems sunk their earnings numbers. 

Boris’ Brexit deal will be voted on on Saturday and the numbers look really tight
Selling Brexit is one thing, but UK at least retail sales were up 0.2% versus an expected decline.
Market futures are down today though as China’s economic growth slowed to only 6%!
US oil inventories pumped up 9.3million barrels, much more than expected, trimming oil futures 

Market Data


Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +1.72 (+0.13%) at 1,285 (YTD: 18.61%; 5YR: 60.4%)
MSCI AC World Equities (USD) up +28.25 (+0.31%) at 9,282 (YTD: 19.43%; 5YR: 54.7%)
Barclays Global Aggregate Bonds up +1.06 (+0.21%) at 510 (YTD: 6.47%; 5YR: 8.9%)    
    
Selected Equity Indices (Capital returns)    
S&P 500 up +8.26 (+0.28%) at 2,998 (YTD: 19.59%; 5YR: 58.9%)    
NASDAQ up +32.67 (+0.40%) at 8,157 (YTD: 22.93%; 5YR: 91.5%)    
Euro STOXX 50 down -10.63 (-0.30%) at 3,589 (YTD: 19.56%; 5YR: 21.1%)    
FTSE 100 up +14.37 (+0.20%) at 7,182 (YTD: 6.75%; 5YR: 13.8%)    
CAC down -23.83 (-0.42%) at 5,673 (YTD: 19.92%; 5YR: 40.7%)    
DAX down -15.16 (-0.12%) at 12,655 (YTD: 19.85%; 5YR: 43.0%)    
Nikkei 225  up +40.82 (+0.18%) at 22,493 (YTD: 12.38%; 5YR: 54.8%)    
Hang Seng down -140.24 (-0.52%) at 26,708 (YTD: 3.34%; 5YR: 16.0%)    
MSCI Emerging Markets up +4.31 (+0.42%) at 1,028 (YTD: 6.48%; 5YR: 5.3%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.59 (began the year at 2.49; 5 years ago it was 0.37)    
US 10 Year up +0.00 at 1.75 (began the year at 2.68; 5 years ago it was 2.19)    
UK 10 Year down -0.04 at 0.68 (began the year at 1.28; 5 years ago it was 2.19)    
Germany 10 Year up +0.01 at -0.40 (began the year at 0.24; 5 years ago it was 0.86)    
France 10 Year up +0.01 at -0.11 (began the year at 0.70; 5 years ago it was 1.30)    
Italy 10 Year up +0.01 at 0.90 (began the year at 2.74; 5 years ago it was 2.50)    
Japan 10 Year up +0.01 at -0.15 (began the year at -0.01; 5 years ago it was 0.47)    
Barclays EM Basket down -0.01 at 5.38 (began the year at 6.22; 5 years ago it was 5.23)
    
Selected Currencies    
$ strengthened +0.0008 versus € (+0.07%) at 1.1118 ($: YTD: 2.92%; 5YR: 12.9%)    
€ weakened -0.0019 versus £ (+0.16%) at 1.1568 (€: YTD: -3.79%; 5YR: 9.0%)    
$ weakened -0.0011 versus £ (-0.09%) at 1.2860 ($: YTD: -0.89%; 5YR: 20.1%)    
¥ weakened -0.0600 versus $ (-0.06%) at 108.5800 (¥: YTD: -0.99%; 5YR: -1.8%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.29 (-0.49%) at 59.21 (YTD: 11.36%; 5YR: -30.4%)    
WTI Crude ($/bbl) up +0.57 (+1.07%) at 53.93 (YTD: 18.76%; 5YR: -34.8%)    
Gold ($/ozt) down -1.76 (-0.12%) at 1490.16 (YTD: 16.20%; 5YR: 20.3%)    
Copper ($/mt) up +9.00 (+0.16%) at 5739.00 (YTD: -3.79%; 5YR: -13.6%)    
    
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