!css

4 October 2019

04/10/2019

Market Data and Morning Chat

Morning Chat 

Friday on my mind: Are we gonna have fun in the City? This week troubled markets much as it did the Easybeats. Tough PMI data, a WTO verdict green-lighting $7.5billion of US tariffs against Europe, and underwhelming ADP US employment data despite falling well within the estimate range.  Equity markets are lower this week and unlikely to turn positive, but maybe today could help. Maybe an easy beat of the US non-farm payrolls release (147,000 forecast)? Maybe some confirmation in Fed Chairman Jerome Powell’s speech today of the markets now fairly certain expectation (90.4% probability) of an October rate cut.

More on the dram-atic WTO: On a less than illustrious day for UK equities, Diageo shareholders were sipping pretty with shares up 1.9%. OK, it doesn’t cover the 5-6% loss from mid-August, but it helps. Shares gained on news US tariffs on European alcohol will be only 25% not 100% and blends, like Diageo’s Johnnie Walker, are exempt.  Despite the dispute is over aircraft parts (which see 10% tariffs), the US is imposing 25% tariffs on various foods like cheeses, frozen meat, pork products, butter and yoghurt.  Duties unrelated to the dispute seem to fly in the face of fairness. 

But its not all doom and gloom: Yes, markets have traded down this week.  Yes, the PMI data was disappointing. Yes, the US is levying new 25% tariffs against selected European goods. And, yes, we’ve seen sluggish economic data lately.  However, the less robust data raises expectations of a Fed rate cut again.  The last FOMC minutes stated: “the Committee ,,, will continue to monitor … incoming information for the economic outlook and will act as appropriate to sustain the expansion”. Thus, the expectation of a rate cut’s rising, and it’s no wonder European and US markets turned up yesterday.

… and it helps that the European futures are starting the day pointing up
Bob Dudley retires as BP CEO after a tough 9 years since Deepwater; Bernard Looney succeeds
Constellations Brands (-6.1%) sees weedy profits over weak Canopy Growth returns

Market Data


Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +3.74 (+0.30%) at 1,247 (YTD: 15.07%; 5YR: 49.3%)
MSCI AC World Equities (USD) up +43.54 (+0.49%) at 8,979 (YTD: 15.54%; 5YR: 44.2%)
Barclays Global Aggregate Bonds up +2.60 (+0.51%) at 513 (YTD: 7.07%; 5YR: 11.4%)
    
Selected Equity Indices (Capital returns)    

S&P 500 up +23.02 (+0.80%) at 2,911 (YTD: 16.11%; 5YR: 47.9%)    
NASDAQ up +87.02 (+1.12%) at 7,872 (YTD: 18.64%; 5YR: 75.9%)    
Euro STOXX 50 up +4.06 (+0.12%) at 3,417 (YTD: 13.86%; 5YR: 9.1%)    
FTSE 100 down -44.90 (-0.63%) at 7,078 (YTD: 5.19%; 5YR: 8.4%)    
CAC up +16.00 (+0.30%) at 5,439 (YTD: 14.97%; 5YR: 27.0%)    
DAX down -338.58 (-2.76%) at 11,925 (YTD: 12.94%; 5YR: 29.7%)    
Nikkei 225  up +68.46 (+0.32%) at 21,410 (YTD: 6.97%; 5YR: 36.3%)    
Hang Seng down -341.90 (-1.31%) at 25,768 (YTD: -0.30%; 5YR: 11.7%)    
MSCI Emerging Markets up +3.08 (+0.31%) at 992 (YTD: 2.74%; 5YR: -0.5%)    
    
Selected Government Bond Yields    
US 2 Year down 0.00 at 1.39 (began the year at 2.49; 5 years ago it was 0.56)    
US 10 Year down 0.00 at 1.53 (began the year at 2.68; 5 years ago it was 2.43)    
UK 10 Year down -0.03 at 0.47 (began the year at 1.28; 5 years ago it was 2.39)    
Germany 10 Year down 0.00 at -0.60 (began the year at 0.24; 5 years ago it was 0.93)    
France 10 Year down 0.00 at -0.29 (began the year at 0.70; 5 years ago it was 1.26)    
Italy 10 Year down -0.01 at 0.81 (began the year at 2.74; 5 years ago it was 2.31)    
Japan 10 Year down -0.02 at -0.22 (began the year at -0.01; 5 years ago it was 0.51)    
Barclays EM Basket down -0.02 at 5.39 (began the year at 6.22; 5 years ago it was 5.38)
    
Selected Currencies    
$ strengthened +0.0008 versus € (+0.07%) at 1.0975 ($: YTD: 4.17%; 5YR: 12.3%)    
€ strengthened +0.0013 versus £ (-0.12%) at 1.1252 (€: YTD: -1.08%; 5YR: 13.4%)    
$ strengthened +0.0025 versus £ (+0.20%) at 1.2348 ($: YTD: 3.12%; 5YR: 22.7%)    
¥ strengthened +0.0100 versus $ (+0.01%) at 106.8100 (¥: YTD: -2.67%; 5YR: 2.8%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.24 (+0.41%) at 58.17 (YTD: 9.40%; 5YR: -36.3%)    
WTI Crude ($/bbl) down -0.19 (-0.36%) at 52.45 (YTD: 15.50%; 5YR: -41.6%)    
Gold ($/ozt) up +2.49 (+0.17%) at 1507.69 (YTD: 17.56%; 5YR: 26.6%)    
Copper ($/mt) down -16.00 (-0.28%) at 5662.00 (YTD: -5.08%; 5YR: -14.8%)    
    
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