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13 September 2019

13/09/2019

Market Data and Morning Chat

Morning Chat 

My last chance to say he won’t be a Draghi on the market: European Central Bank President Mario Draghi bowed out at yesterday’s meeting, and he made sure it was notable. The deposit rate’s cut from minus 0.4% to minus 0.5% - yes, more negative. The ECB charges banks to lend them money. However, since negative rates are seriously damaging European Bank profitability, he did exempt part of their assets from the negative rate to help. Plus, he restarted the monthly bond purchases at a €20billion clip to start. Consequently, European bonds rallied – especially Italians - and Trump got tweeting mad.

It’s all happening… or is it? While Mario’s carting in money to stimulate European markets, Americans offered their own sentiment boost. Bloomberg news reported Trump’s advisors were considering an interim trade deal with China that would delay or reduce some tariffs in exchange for Chinese commitments on intellectual property rights and agricultural purchases. Rally! At least until the reports were denied by a “senior White House official”. Could it be one of those “we have the utmost confidence in Bob” comments [Bob’s fictitious] days before Bob’s ignominious dismissal? Well, Donald Trump closed the day signalling he would consider it. Yay!

Inflated expectations: A couple of days ago UK wage data showed wages growing 2.1% after inflation, pretty good, and it might be better when we get next week’s inflation data. US wages are growing 5.2% or 3.4% after inflation, until yesterday.  Yesterday, inflation was announced at 1.7% meaning wages are up 3.5% after inflation. However, it might not last. The US core inflation rose a higher-than-expected 2.4% as medical care, shelter and recreation costs accelerated. That could be worrying if it continues as the optimistic sentiment around rate cuts may be forced to be a pessimistic sentiment around rate hikes.
 
Boris wins! A Northern Irish court ruled a no-deal Brexit doesn't violate the Good Friday Agreement
Labour revealed tax plans on currency & commodity trading, and on private schools.
Babcock (+1.0%) looks more shipshape on £1¼billion contract win to build 5 type 31e frigates
Santander announced it has digitised bond issuance using blockchain – the first bank to do so
Left wing icon Thomas Piketty is out to eliminate billionaires in his latest commentary on capitalism – presumably clubbing them with his weighty 1,232page tome so he can expropriate their wealth.  

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +3.93 (+0.31%) at 1,284 (YTD: 18.51%; 5YR: 50.4%)
MSCI AC World Equities (USD) up +32.15 (+0.35%) at 9,260 (YTD: 19.15%; 5YR: 44.3%)
Barclays Global Aggregate Bonds down -0.15 (-0.03%) at 509 (YTD: 6.21%; 5YR: 9.6%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +8.64 (+0.29%) at 3,010 (YTD: 20.05%; 5YR: 51.6%)    
NASDAQ up +24.79 (+0.30%) at 8,194 (YTD: 23.50%; 5YR: 79.4%)    
Euro STOXX 50 up +22.04 (+0.63%) at 3,539 (YTD: 17.91%; 5YR: 9.4%)    
FTSE 100 up +6.64 (+0.09%) at 7,345 (YTD: 9.16%; 5YR: 7.9%)    
CAC up +24.80 (+0.44%) at 5,643 (YTD: 19.28%; 5YR: 27.0%)    
DAX up +51.18 (+0.41%) at 12,410 (YTD: 17.53%; 5YR: 28.6%)    
Nikkei 225  up +228.68 (+1.05%) at 21,988 (YTD: 9.86%; 5YR: 37.9%)    
Hang Seng up +138.75 (+0.51%) at 27,226 (YTD: 5.34%; 5YR: 10.7%)    
MSCI Emerging Markets up +5.28 (+0.52%) at 1,022 (YTD: 5.86%; 5YR: -3.7%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.71 (began the year at 2.49; 5 years ago it was 0.56)    
US 10 Year up +0.01 at 1.78 (began the year at 2.68; 5 years ago it was 2.61)    
UK 10 Year up +0.04 at 0.67 (began the year at 1.28; 5 years ago it was 2.53)    
Germany 10 Year up +0.02 at -0.50 (began the year at 0.24; 5 years ago it was 1.08)    
France 10 Year up +0.02 at -0.22 (began the year at 0.70; 5 years ago it was 1.43)    
Italy 10 Year up +0.05 at 0.91 (began the year at 2.74; 5 years ago it was 2.46)    
Japan 10 Year up +0.05 at -0.17 (began the year at -0.01; 5 years ago it was 0.57)    
Barclays EM Basket down -0.03 at 5.53 (began the year at 6.22; 5 years ago it was 5.38)
    
Selected Currencies    
$ weakened -0.0022 versus € (-0.20%) at 1.1090 ($: YTD: 3.16%; 5YR: 14.5%)    
€ weakened -0.0005 versus £ (+0.04%) at 1.1163 (€: YTD: -0.30%; 5YR: 12.3%)    
$ weakened -0.0030 versus £ (-0.24%) at 1.2379 ($: YTD: 2.88%; 5YR: 23.9%)    
¥ unchanged 0.0000 versus $ (0.00%) at 108.0300 (¥: YTD: -1.51%; 5YR: -0.8%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.21 (-0.35%) at 60.53 (YTD: 13.84%; 5YR: -37.2%)    
WTI Crude ($/bbl) down -0.66 (-1.18%) at 55.09 (YTD: 21.32%; 5YR: -40.3%)    
Gold ($/ozt) up +4.79 (+0.32%) at 1504.06 (YTD: 17.28%; 5YR: 22.3%)    
Copper ($/mt) up +60.50 (+1.05%) at 5833.00 (YTD: -2.21%; 5YR: -14.7%)    
    
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