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20 September 2019

20/09/2019

Market Data and Morning Chat

Morning Chat

If we can have a good Friday… We could score the fifth positive week in succession. OK, China needs a big day, but Japan and the US are already in positive territory, and if the Europeans repeat yesterday’s gains they’re there.  The US hasn’t moved much since Wednesday’s rate cut after Fed Chairman Jerome Powell equivocated over future rate reductions, but Europe was happy enough and the pound rose after Jean-Claude Junker stated he was optimistic over a Brexit deal.   We get much economic data today – just EU consumer confidence - so gains are probably dependant on trade talk developments.

Entrenched uncertainty: Moreover, Europe’s gains came after the OECD published their bi-annual economic forecasts, which were trimmed across the board (mostly) this year and next. Their new estimate for global growth in 2019 and 2020 are 2.9% and 3.0% respectively – 0.3% and 0.4% lower than previous estimates.  The OECD lays the blame on “entrenched uncertainty” with the protracted US-China trade war the principle culprit. Germany gets heavy brakes applied over autos, cut by half for 2020 to 0.6% - the second slowest pace in Europe after Italy’s 0.4%. The UK sees 1.0% and 0.9% … depending on any Brexit ambiguities.

A bit cheesy: Darden Restaurants announced earnings and they were a little less tasty than hoped.  The shares slid 5.1%, which seems a bit of an over-reaction.  The problem is the like-for-like sales comparison in new acquisition Cheddar’s.  The big franchise, Olive Garden, saw like-for-like sales  +2.2% versus +1.6% expected, Longhorn Steakhouse was in line and continues offering meaty gains.  Cheddar’s though declined 5.4% versus the 2.5% slip expected. Overall, it meant a slight miss on like-for-like at +0.9% versus +1.1% expected.  An earnings beat remained on the menu, total sales were up 3.5% and the gross margin remained firm.

Next's (-5.2%)  in-line earnings and nicely tailored guidance didn't stop the shares falling.
… probably on the back of the 48% year-to-date gain and underwhelming UK retail sales data.
Microsoft (+1.9%) opened the door to a $40billion share buyback and 10% uplift to its dividend.
The Brexit proroguing hearing is now over – the judges verdict is expected early next week

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +1.44 (+0.11%) at 1,285 (YTD: 18.61%; 5YR: 49.5%)
MSCI AC World Equities (USD) up +15.81 (+0.17%) at 9,275 (YTD: 19.34%; 5YR: 43.6%)
Barclays Global Aggregate Bonds up +0.67 (+0.13%) at 509 (YTD: 6.36%; 5YR: 10.0%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +0.06 (+0.00%) at 3,007 (YTD: 19.94%; 5YR: 49.6%)    
NASDAQ up +5.49 (+0.07%) at 8,183 (YTD: 23.32%; 5YR: 78.7%)    
Euro STOXX 50 up +24.61 (+0.70%) at 3,553 (YTD: 18.37%; 5YR: 8.5%)    
FTSE 100 up +42.37 (+0.58%) at 7,356 (YTD: 9.34%; 5YR: 7.6%)    
CAC up +38.43 (+0.68%) at 5,659 (YTD: 19.62%; 5YR: 26.9%)    
DAX up +68.08 (+0.55%) at 12,458 (YTD: 17.98%; 5YR: 27.1%)    
Nikkei 225  up +34.64 (+0.16%) at 22,079 (YTD: 10.31%; 5YR: 35.3%)    
Hang Seng down -7.26 (-0.03%) at 26,462 (YTD: 2.38%; 5YR: 8.9%)    
MSCI Emerging Markets down -4.80 (-0.47%) at 1,017 (YTD: 5.26%; 5YR: -3.5%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.73 (began the year at 2.49; 5 years ago it was 0.56)    
US 10 Year down -0.02 at 1.76 (began the year at 2.68; 5 years ago it was 2.57)    
UK 10 Year down -0.01 at 0.64 (began the year at 1.28; 5 years ago it was 2.54)    
Germany 10 Year down -0.01 at -0.51 (began the year at 0.24; 5 years ago it was 1.04)    
France 10 Year down -0.01 at -0.22 (began the year at 0.70; 5 years ago it was 1.39)    
Italy 10 Year up +0.00 at 0.89 (began the year at 2.74; 5 years ago it was 2.37)    
Japan 10 Year down -0.01 at -0.22 (began the year at -0.01; 5 years ago it was 0.56)    
Barclays EM Basket up +0.01 at 5.55 (began the year at 6.22; 5 years ago it was 5.34)
    
Selected Currencies    
$ weakened -0.0011 versus € (-0.10%) at 1.1056 ($: YTD: 3.46%; 5YR: 13.8%)    
€ weakened -0.0067 versus £ (+0.59%) at 1.1377 (€: YTD: -2.17%; 5YR: 11.7%)    
$ weakened -0.0087 versus £ (-0.70%) at 1.2578 ($: YTD: 1.32%; 5YR: 22.8%)    
¥ strengthened +0.1100 versus $ (+0.10%) at 107.8500 (¥: YTD: -1.68%; 5YR: 1.0%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.03 (+0.05%) at 64.79 (YTD: 21.85%; 5YR: -33.2%)    
WTI Crude ($/bbl) up +0.02 (+0.03%) at 58.13 (YTD: 28.01%; 5YR: -37.1%)    
Gold ($/ozt) up +6.37 (+0.42%) at 1505.47 (YTD: 17.39%; 5YR: 23.8%)    
Copper ($/mt) down -26.00 (-0.45%) at 5788.00 (YTD: -2.97%; 5YR: -15.3%)    
    
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