!css

10th March 2020

10/03/2020

Market Data and Morning Chat

Morning Chat

Not pumped over oil: It’s been a tenuous alliance, but the OPEC-Russia production agreement came to a slippery end on the weekend.  Moreover, both Russia and Saudi Arabia stated they would not only disagree, but would lift production to capture market share as well. Rather predictably, massively increasing supply when everyone is worried demand – especially with Covid-19 around – is under pressure, triggered a major price correction. Hey presto – the biggest drop since 1991 – as oil tanked by nearly a third. Likewise, energy sector stocks suffered a major blow-out falling by a quarter to lead significant declines in global equity indices. 

The price of safe not sorry: Holding gold can be tricky. It only feeds you once it’s sold, and there’s an opportunity cost to holding it (unless you’re German where it’s an opportunity benefit.)  However, with global yields falling in reaction to the current state of affairs, the opportunity cost is declining. Therefore, investors have bought safe haven assets like gold, pushing the price up 9.4% year-to-date to $1665 (only a few dollars from a 7-year high) and just £24 from its all-time sterling high of £1294. Maybe not massive, but a tasty counter-weight to the markets all the same.

Gilt-y pleasures: By the way, those global yield declines also mean there’s been a shift in bond values as well. Within the UK gilt market, the 5-year gilt has rallied 2½% since the start of the year and the 10-year by 5¾%. You might not get much of a yield buying bonds today, but the capital value increase holders have seen has been some compensation.  Correspondingly treasury yields Stateside have tumbled 1¼  to 1½% this year translating to a near-11% capital gain. Sure, taking lower credit terms has its risks, but even there there’ve been profits to make this year. 

Now, that’s a better sight, the equity market futures are pointing to a reasonable rebound
… after Japan rebounds on PM Shinzo Abe’s pledge to work with the BoJ to boost the economy
…Oil prices recovered some lost ground too on possible US support measures
Italy moves to a complete lockdown on movement, as China adds only 17 new cases
French Q4 payrolls up by 0.4% - more than the 0.2% expected – with 90,800 more employed
… but January’s Industrial Production in France increased only 1.2% versus the 1.8% expected 

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -91.36 (-7.25%) at 1,169 (YTD: -14.98%; 5YR: 30.6%)
MSCI AC World Equities (USD) down -653.54 (-7.16%) at 8,474 (YTD: -15.08%; 5YR: 32.0%)
Barclays Global Aggregate Bonds up +4.39 (+0.82%) at 539 (YTD: 5.34%; 5YR: 21.7%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -225.81 (-7.60%) at 2,747 (YTD: -14.99%; 5YR: 34.4%)    
NASDAQ down -624.94 (-7.29%) at 7,951 (YTD: -11.39%; 5YR: 63.6%)    
Euro STOXX 50 down -273.00 (-8.45%) at 2,959 (YTD: -20.99%; 5YR: -17.0%)    
FTSE 100 down -496.78 (-7.69%) at 5,966 (YTD: -20.90%; 5YR: -11.0%)    
CAC down -431.20 (-8.39%) at 4,708 (YTD: -21.25%; 5YR: -3.6%)    
DAX down -916.85 (-7.94%) at 10,625 (YTD: -19.81%; 5YR: -7.6%)    
Nikkei 225  up +168.36 (+0.85%) at 19,867 (YTD: -16.02%; 5YR: 6.4%)    
Hang Seng up +441.18 (+1.76%) at 25,482 (YTD: -9.61%; 5YR: 6.6%)    
MSCI Emerging Markets down -64.16 (-6.34%) at 948 (YTD: -14.96%; 5YR: 0.4%)    
    
Selected Government Bond Yields    
US 2 Year up +0.05 at 0.43 (began the year at 1.57; 5 years ago it was 0.68)    
US 10 Year up +0.10 at 0.64 (began the year at 1.92; 5 years ago it was 2.13)    
UK 10 Year down -0.08 at 0.16 (began the year at 0.82; 5 years ago it was 1.80)    
Germany 10 Year up +0.08 at -0.78 (began the year at -0.19; 5 years ago it was 0.23)    
France 10 Year up +0.05 at -0.33 (began the year at 0.12; 5 years ago it was 0.52)    
Italy 10 Year down -0.05 at 1.37 (began the year at 1.41; 5 years ago it was 1.22)    
Japan 10 Year up +0.08 at -0.09 (began the year at -0.02; 5 years ago it was 0.46)    
Barclays EM Basket up +0.00 at 3.80 (began the year at 4.27; 5 years ago it was 5.23)
    
Selected Currencies    
$ strengthened +0.0097 versus € (+0.85%) at 1.1366 ($: YTD: -1.22%; 5YR: -6.0%)    
€ weakened -0.0033 versus £ (+0.29%) at 1.1478 (€: YTD: 2.92%; 5YR: 22.7%)    
$ strengthened +0.0075 versus £ (+0.57%) at 1.3046 ($: YTD: 1.64%; 5YR: 13.6%)    
¥ weakened -1.9900 versus $ (-1.91%) at 104.1600 (¥: YTD: -4.24%; 5YR: 16.2%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +2.55 (+7.88%) at 34.89 (YTD: -47.47%; 5YR: -37.6%)    
WTI Crude ($/bbl) down -10.15 (-24.59%) at 31.13 (YTD: -49.02%; 5YR: -37.7%)    
Gold ($/ozt) down -7.17 (-0.43%) at 1665.62 (YTD: 9.38%; 5YR: 43.5%)    
Copper ($/mt) down -72.00 (-1.28%) at 5535.00 (YTD: -10.35%; 5YR: -5.7%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros