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18 September 2019

18/09/2019

Market Data and Morning Chat

Morning Chat 

Will it oil right on the night? The Saudi’s have a strong incentive to get the Abqaiq refinery rapidly back to normal.  Obviously, recovering the foreign earnings of half the country’s oil production is a great motivator. But more, with what is expected to be the world’s largest initial public offering when they sell off a chunk of Aramco, normal oil service is essential to earn top dollar on the sale. Given the spur, maybe it’s not so surprising that the Saudi’s announced they’re close to resuming 70% of the lost production and triggering a near-6% fall in oil prices.

How did equities take it: So, Monday saw a massive rally in oil prices leading oil stocks to top the equity charts, interest rate cut expectations to moderate (over anticipated inflation), and the markets to slide slightly. Now, reverse the oil price gains somewhat. Sure enough, oil stocks generally gave ground with a couple training the US charts, and the probability of the Fed rate cut… fell; the probability of a cut being announced today is now down to 47%. Yes, its over still higher-than-they-were oil prices, but also the improved tone over US-China trade talks and yesterday’s economic data.

Improved economic data? Yup, the US Federal Reserve published better-than-expected August industrial production data. Last month industrial production fell 0.1% on the month with manufacturing production down 0.4% and some reports of manufacturing being in recession. It would appear it isn’t so bad. Broad-based increases led by a strong surge in machinery (1.0%) and mining (+1.4%) boosted manufacturing production 0.5% - completely reversing last month’s decline – while industrial production rattled up 0.6%, the largest gain in a year and three times the pace expected. Oh, and capacity utilisation was higher than expected too though below the perceived inflation-inducing 80% level.

Well, well, well, while down yesterday, BP is still +2.6% this week for a 9.1% total return year-to-date
Not a great courier move, FedEx (-9.8% aftermarket) delivered a knocked-about forecast over trade
European car sales took a wrong turn, falling 8.4% in August after an upbeat July
Likud or not, the Israeli election is too close to call based on the exit polls
Poor ole’ Pedro – Spanish PM Sanchez likely heads to the polls after failing to form a government

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +1.67 (+0.13%) at 1,284 (YTD: 18.49%; 5YR: 49.4%)
MSCI AC World Equities (USD) up +24.90 (+0.27%) at 9,262 (YTD: 19.17%; 5YR: 43.2%)
Barclays Global Aggregate Bonds up +0.65 (+0.13%) at 508 (YTD: 5.98%; 5YR: 9.5%)    
    
Selected Equity Indices (Capital returns)    
S&P 500 up +7.74 (+0.26%) at 3,006 (YTD: 19.90%; 5YR: 49.4%)    
NASDAQ up +32.47 (+0.40%) at 8,186 (YTD: 23.37%; 5YR: 78.2%)    
Euro STOXX 50 up +2.81 (+0.08%) at 3,521 (YTD: 17.32%; 5YR: 7.6%)    
FTSE 100 down -1.01 (-0.01%) at 7,320 (YTD: 8.80%; 5YR: 7.3%)    
CAC up +13.28 (+0.24%) at 5,616 (YTD: 18.70%; 5YR: 25.8%)    
DAX down -7.70 (-0.06%) at 12,373 (YTD: 17.18%; 5YR: 26.3%)    
Nikkei 225  down -40.61 (-0.18%) at 21,961 (YTD: 9.72%; 5YR: 36.7%)    
Hang Seng down -5.02 (-0.02%) at 26,785 (YTD: 3.64%; 5YR: 10.8%)    
MSCI Emerging Markets down -8.16 (-0.79%) at 1,019 (YTD: 5.50%; 5YR: -3.5%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.72 (began the year at 2.49; 5 years ago it was 0.56)    
US 10 Year down -0.01 at 1.79 (began the year at 2.68; 5 years ago it was 2.61)    
UK 10 Year up +0.00 at 0.70 (began the year at 1.28; 5 years ago it was 2.58)    
Germany 10 Year down -0.01 at -0.48 (began the year at 0.24; 5 years ago it was 1.08)    
France 10 Year down -0.01 at -0.19 (began the year at 0.70; 5 years ago it was 1.44)    
Italy 10 Year down -0.01 at 0.90 (began the year at 2.74; 5 years ago it was 2.44)    
Japan 10 Year down -0.03 at -0.19 (began the year at -0.01; 5 years ago it was 0.56)    
Barclays EM Basket up +0.01 at 5.56 (began the year at 6.22; 5 years ago it was 5.33)
    
Selected Currencies    
$ strengthened +0.0004 versus € (+0.04%) at 1.1066 ($: YTD: 3.37%; 5YR: 14.4%)    
€ strengthened +0.0011 versus £ (-0.10%) at 1.1284 (€: YTD: -1.36%; 5YR: 12.4%)    
$ strengthened +0.0016 versus £ (+0.13%) at 1.2487 ($: YTD: 2.03%; 5YR: 23.8%)    
¥ weakened -0.1200 versus $ (-0.11%) at 108.2000 (¥: YTD: -1.35%; 5YR: 0.4%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.55 (+0.85%) at 65.01 (YTD: 22.27%; 5YR: -32.6%)    
WTI Crude ($/bbl) down -3.56 (-5.66%) at 59.34 (YTD: 30.68%; 5YR: -37.2%)    
Gold ($/ozt) up +0.44 (+0.03%) at 1501.82 (YTD: 17.11%; 5YR: 22.6%)    
Copper ($/mt) down -49.00 (-0.83%) at 5821.00 (YTD: -2.41%; 5YR: -16.0%)    
    
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