!css

11 September 2019

11/09/2019

Market Data and Morning Chat

Morning Chat 

You’re growing to like this: The technical definition of a recession is two quarters of falling GDP. The UK’s GDP fell in Q2 and – technically – we could be in recession if it falls in Q3. That’s where the Office of National Statistics’ monthly GDP series gives some insight. June’s data point was 0.0% - not helpful – and, coupled with slowing PMI data, prompted expectations of a weak July (+0.1% was expected). However, the economy grew 0.3%, the fastest pace since January amid broad-based gains.  It may only be one month, and August may slow down, but it’s a solid start.

Even so, Brexit was the bigger factor: Despite better-than-expected monthly GDP growth, construction output and manufacturing output, the key factor was the anticipation – and actuality – of the European Union (Withdrawal) (No.2) Act passing into law.  The pound rallied to the mid-$1.23’s to start the day and UK equities slipped.  When it was announced the law had Royal Assent, there was a fleeting dip in the pound – quickly forgotten – a solid upward turn in equities as the probabilities of no-deal Brexit appear reduced, and a shift higher of 6 to 8 basis points across the longer-end of the UK yield curve.

The tone seems firmer, but markets generally sag: Yes, despite rallying, UK equities closed lower while continental European equities were at best mixed with little driving them beyond the Brexit tussle. But even across the Atlantic gains were mixed - a 2.2% oil price jump on OPEC news of continued production cuts pumped up energy companies, while various consumer goods names were sold down. Pretty surprising considering US Treasury Secretary Steven Mnuchin declared the US and China have a conceptual framework on enforcement concerns. It appears investors are still exercised by trade, but now need more weighty progress to jump.

Markets soft with futures slightly lower likely in anticipation of Thursday’s ECB meeting
… and France’s softer industrial & manufacturing production and payrolls numbers 
Bercow treats MP’s to a Halloween resignation – he’s exiting when Britain was scheduled to
Labour continue to express confidence in the government by rejecting Johnson’s election vote
Ford’s bonds need a bit of a pick-up having been downgraded to non-investment grade
Jack Ma is saying closesesame on his 20-year tenure as chairman of Alibaba

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +0.32 (+0.02%) at 1,269 (YTD: 17.16%; 5YR: 48.2%)
MSCI AC World Equities (USD) down -1.47 (-0.02%) at 9,159 (YTD: 17.86%; 5YR: 42.2%)
Barclays Global Aggregate Bonds down -1.70 (-0.33%) at 512 (YTD: 6.90%; 5YR: 9.9%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -0.28 (-0.01%) at 2,978 (YTD: 18.81%; 5YR: 49.2%)    
NASDAQ down -15.64 (-0.19%) at 8,087 (YTD: 21.89%; 5YR: 76.3%)    
Euro STOXX 50 down -0.17 (0.00%) at 3,495 (YTD: 16.45%; 5YR: 7.7%)    
FTSE 100 down -46.53 (-0.64%) at 7,236 (YTD: 7.55%; 5YR: 5.9%)    
CAC down -15.04 (-0.27%) at 5,589 (YTD: 18.14%; 5YR: 25.6%)    
DAX up +34.37 (+0.28%) at 12,226 (YTD: 15.79%; 5YR: 26.0%)    
Nikkei 225  up +73.68 (+0.35%) at 21,392 (YTD: 6.88%; 5YR: 35.5%)    
Hang Seng down -8.37 (-0.03%) at 26,673 (YTD: 3.20%; 5YR: 8.0%)    
MSCI Emerging Markets up +2.62 (+0.26%) at 1,011 (YTD: 4.64%; 5YR: -6.0%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.59 (began the year at 2.49; 5 years ago it was 0.57)    
US 10 Year down -0.01 at 1.63 (began the year at 2.68; 5 years ago it was 2.54)    
UK 10 Year up +0.09 at 0.59 (began the year at 1.28; 5 years ago it was 2.51)    
Germany 10 Year up +0.00 at -0.58 (began the year at 0.24; 5 years ago it was 1.05)    
France 10 Year up +0.00 at -0.28 (began the year at 0.70; 5 years ago it was 1.36)    
Italy 10 Year up +0.00 at 0.95 (began the year at 2.74; 5 years ago it was 2.40)    
Japan 10 Year up +0.03 at -0.23 (began the year at -0.01; 5 years ago it was 0.55)    
Barclays EM Basket up +0.02 at 5.53 (began the year at 6.22; 5 years ago it was 5.34)
    
Selected Currencies    
$ strengthened +0.0015 versus € (+0.14%) at 1.1045 ($: YTD: 3.55%; 5YR: 14.4%)    
€ weakened -0.0017 versus £ (+0.15%) at 1.1181 (€: YTD: -0.46%; 5YR: 12.1%)    
$ weakened -0.0002 versus £ (-0.02%) at 1.2350 ($: YTD: 3.11%; 5YR: 23.7%)    
¥ weakened -0.2900 versus $ (-0.27%) at 107.3400 (¥: YTD: -2.16%; 5YR: -0.5%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.13 (+0.21%) at 63.47 (YTD: 19.37%; 5YR: -34.7%)    
WTI Crude ($/bbl) up +1.33 (+2.35%) at 57.85 (YTD: 27.39%; 5YR: -37.6%)    
Gold ($/ozt) down -7.72 (-0.51%) at 1491.41 (YTD: 16.29%; 5YR: 19.3%)    
Copper ($/mt) down -18.00 (-0.31%) at 5815.00 (YTD: -2.51%; 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