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7 October 2019

07/10/2019

Market Data and Morning Chat

Morning Chat

What a difference 1,000 makes! Last week equities took a pounding with Europe down 2½ to 3½% and the US … oh, wait a minute, down 1% to up 1% (Nasdaq)! Part of the problem was weak PMI data, part of it the WTO decision against the EU, and part was US employment data.  When the ADP survey came out at 135,000 – below the 157,000 forecast, equities had a torrid day.  Two days later, when the non-farm payrolls number came in at 136,000 versus a 168,000 estimate… markets rallied. Go figure. Possibly the 50-year low 3.5% unemployment rate really helped. 

Rates, tariffs and technicalities: The negative tone swirling around last week’s economic data shifted US rate expectations from a 64.7% chance of a cut at the October 31st Fed meeting to a 76.4% by Friday.  Minutes of the last meeting, due Wednesday, could move those odds further, and any increase could bolster markets.  So too could news over US-China trade as the Chinese negotiators drop in on Washington this week. Meanwhile, UK monthly GDP data could signal if a technical recession is likely or not, much as today’s weaker-than-expected -0.6% German factory orders might. We could even know more about Brexit!

Ah, yes, Brexit: Boris Johnson is adamant that the UK will leave the EU on October 31.  Barring some legal loophole, court challenge or breach, the Benn Act would imply that the only way to accomplish the task is if a Brexit deal is successfully completed. In the Sun on Sunday and Sunday Express, Johnson implied that Parliament would be supported by Parliament and with compromise and co-operation from the EU a deal can be reached. The EU’s tone, while not in full agreement, appears to be shifting. Maybe. They would hope that Johnson is able to further compromise too.

Polling’s shifted too with the Tories on 33.6%, Labour 22.8% & Lib-Dems 20.2% (5 poll average)
The bond-equity yield gap is getting close to the 2016 high signalling equities relative cheapness
Equity futures mixed – god for Europe, but trade negotiation fears likely weigh on US
German banks beginning to pass negative rates on to deposit holders

Market Data


Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +12.41 (+0.99%) at 1,259 (YTD: 16.22%; 5YR: 52.3%)
MSCI AC World Equities (USD) up +94.69 (+1.05%) at 9,074 (YTD: 16.76%; 5YR: 47.0%)
Barclays Global Aggregate Bonds up +0.29 (+0.06%) at 513 (YTD: 7.13%; 5YR: 10.5%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +41.38 (+1.42%) at 2,952 (YTD: 17.76%; 5YR: 52.6%)    
NASDAQ up +110.21 (+1.40%) at 7,982 (YTD: 20.30%; 5YR: 82.0%)    
Euro STOXX 50 up +29.34 (+0.86%) at 3,447 (YTD: 14.84%; 5YR: 11.8%)    
FTSE 100 up +77.74 (+1.10%) at 7,155 (YTD: 6.35%; 5YR: 10.2%)    
CAC up +49.55 (+0.91%) at 5,488 (YTD: 16.02%; 5YR: 30.4%)    
DAX up +87.56 (+0.73%) at 12,013 (YTD: 13.77%; 5YR: 32.2%)    
Nikkei 225  down -34.95 (-0.16%) at 21,375 (YTD: 6.80%; 5YR: 35.4%)    
Hang Seng down -289.28 (-1.11%) at 25,821 (YTD: -0.10%; 5YR: 10.2%)    
MSCI Emerging Markets up +4.30 (+0.43%) at 997 (YTD: 3.19%; 5YR: -1.4%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.40 (began the year at 2.49; 5 years ago it was 0.50)    
US 10 Year down -0.01 at 1.52 (began the year at 2.68; 5 years ago it was 2.34)    
UK 10 Year down -0.03 at 0.44 (began the year at 1.28; 5 years ago it was 2.29)    
Germany 10 Year down 0.00 at -0.59 (began the year at 0.24; 5 years ago it was 0.91)    
France 10 Year down 0.00 at -0.29 (began the year at 0.70; 5 years ago it was 1.27)    
Italy 10 Year down -0.01 at 0.82 (began the year at 2.74; 5 years ago it was 2.34)    
Japan 10 Year down -0.01 at -0.23 (began the year at -0.01; 5 years ago it was 0.51)    
Barclays EM Basket down -0.01 at 5.38 (began the year at 6.22; 5 years ago it was 5.35)
    
Selected Currencies    
$ strengthened +0.0004 versus € (+0.04%) at 1.0980 ($: YTD: 4.12%; 5YR: 13.2%)    
€ strengthened +0.0007 versus £ (-0.06%) at 1.1218 (€: YTD: -0.78%; 5YR: 13.3%)    
$ strengthened +0.0013 versus £ (+0.11%) at 1.2316 ($: YTD: 3.37%; 5YR: 23.4%)    
¥ weakened -0.0100 versus $ (-0.01%) at 106.8800 (¥: YTD: -2.60%; 5YR: 1.3%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.03 (-0.05%) at 58.77 (YTD: 10.53%; 5YR: -35.4%)    
WTI Crude ($/bbl) up +0.36 (+0.69%) at 52.81 (YTD: 16.30%; 5YR: -41.2%)    
Gold ($/ozt) up +1.10 (+0.07%) at 1505.85 (YTD: 17.42%; 5YR: 24.6%)    
Copper ($/mt) down -19.00 (-0.34%) at 5643.00 (YTD: -5.40%; 5YR: -15.0%)    
    
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