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19 September 2019

19/09/2019

Market Data and Morning Chat

Morning Chat

Well Fed: Days ago the probability of a Fed rate cut announcement at yesterday’s meeting was maybe not a dead cert, but nearly. However, upbeat comments over US-China trade talks coupled with the potentially inflationary impact of the damage to Saudi Arabia’s Abqaiq processing facility reduced those odds to effectively a coin toss. Moreover, a last minute cash squeeze forcing the Fed to post effective Fed rates and secured overnight financing rates higher than targets – hinting higher rates might be needed – didn’t help. So did they cut? Yes, by a 7-3 vote, but with little guidance on the next move.

So markets must have been happy? The announcement came after the UK and European close, so those markets moved more on the oil market. Saudi’s apparent rapid recovery coupled with a surprise rise in US inventories left oil prices sliding and European markets trading up on the news. Meanwhile, lower than anticipated UK inflation data and Brexit anxieties knocked the pound and in turn the dollar-earners leaving UK equities ever-so-slightly lower. The US however was able to react to the rate cut.  There was a tepid last minute surge (the nebulous guidance tempering excessive enthusiasm) as equities closed ever-so-slightly up.

Maybe keeping politicians out of the legislature is a good thing: The UK Supreme Court continues hearing the proroguing Parliament case with arguments that proroguing hampered the government being properly held to account; we’ll see how the case runs soon.  Meanwhile, in Spain, Prime Minister Pedro Sanchez has to have another election after failing to form a government. Not that appears to be a problem for the Spanish economy, which is clocking growth at 2.2%, higher than the EU average. That’s what happened in Belgium in 2011 and the Netherlands in 2017 too. Maybe we should prorogue Parliament more often.

IAG (+1.9%), BA’s parent, saw tailwinds from the strike cancellation and lower oil prices
Equity futures are looking a bit more red than green this morning as Iran tensions play up
The Bank of Japan opts to hold rates – Kuroda is still answering questions at the moment 
… but it has prompted a Yen rally.  Later, it’s the Bank of England’s turn (Sterling rally?)

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -0.13 (-0.01%) at 1,284 (YTD: 18.48%; 5YR: 49.3%)
MSCI AC World Equities (USD) down -2.86 (-0.03%) at 9,259 (YTD: 19.13%; 5YR: 43.3%)
Barclays Global Aggregate Bonds up +1.18 (+0.23%) at 509 (YTD: 6.22%; 5YR: 9.9%)    
    
Selected Equity Indices (Capital returns)    
S&P 500 up +1.03 (+0.03%) at 3,007 (YTD: 19.94%; 5YR: 49.6%)    
NASDAQ down -8.62 (-0.11%) at 8,177 (YTD: 23.24%; 5YR: 78.6%)    
Euro STOXX 50 up +6.78 (+0.19%) at 3,528 (YTD: 17.55%; 5YR: 7.8%)    
FTSE 100 down -6.35 (-0.09%) at 7,314 (YTD: 8.71%; 5YR: 7.0%)    
CAC up +5.14 (+0.09%) at 5,621 (YTD: 18.81%; 5YR: 26.0%)    
DAX up +17.01 (+0.14%) at 12,390 (YTD: 17.34%; 5YR: 26.4%)    
Nikkei 225  up +83.74 (+0.38%) at 22,044 (YTD: 10.14%; 5YR: 35.1%)    
Hang Seng down -304.99 (-1.14%) at 26,449 (YTD: 2.33%; 5YR: 8.8%)    
MSCI Emerging Markets up +2.44 (+0.24%) at 1,021 (YTD: 5.76%; 5YR: -3.1%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.76 (began the year at 2.49; 5 years ago it was 0.56)    
US 10 Year down -0.01 at 1.78 (began the year at 2.68; 5 years ago it was 2.57)    
UK 10 Year down -0.05 at 0.64 (began the year at 1.28; 5 years ago it was 2.54)    
Germany 10 Year up +0.01 at -0.50 (began the year at 0.24; 5 years ago it was 1.04)    
France 10 Year up +0.01 at -0.21 (began the year at 0.70; 5 years ago it was 1.39)    
Italy 10 Year up +0.02 at 0.89 (began the year at 2.74; 5 years ago it was 2.37)    
Japan 10 Year down -0.03 at -0.22 (began the year at -0.01; 5 years ago it was 0.56)    
Barclays EM Basket down -0.02 at 5.54 (began the year at 6.22; 5 years ago it was 5.34)
    
Selected Currencies    
$ strengthened +0.0020 versus € (+0.18%) at 1.1043 ($: YTD: 3.57%; 5YR: 13.9%)    
€ weakened -0.0013 versus £ (+0.12%) at 1.1293 (€: YTD: -1.44%; 5YR: 12.5%)    
$ strengthened +0.0008 versus £ (+0.06%) at 1.2471 ($: YTD: 2.16%; 5YR: 23.5%)    
¥ strengthened +0.2200 versus $ (+0.20%) at 107.9500 (¥: YTD: -1.58%; 5YR: 0.9%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.10 (-0.16%) at 63.95 (YTD: 20.27%; 5YR: -34.0%)    
WTI Crude ($/bbl) down -1.23 (-2.07%) at 58.11 (YTD: 27.97%; 5YR: -37.6%)    
Gold ($/ozt) up +1.81 (+0.12%) at 1495.80 (YTD: 16.64%; 5YR: 23.0%)    
Copper ($/mt) down -7.00 (-0.12%) at 5814.00 (YTD: -2.53%; 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