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11th March 2020

11/03/2020

Market Data and Morning Chat

Morning Chat

Nothing travels faster than the speed of light with the possible exception of bad news: Or so it seemed for European equities yesterday.  Stocks were off to a bright start, with futures pointing to an upbeat day – not uncommon when markets fall heavily.  However, by 11am, niggling doubts over any stimulus plan to tackle Covid-19 – especially from the US – sent the markets heavily into reverse. By the close, gains had slipped to losses, albeit only marginally for the UK as a 12% rally in oil prices lifted BP and Shell over 4% and banks & miners also held their gains.

We demand rigidly defined areas of doubt and uncertainty! The US, on the other hand, had a few more hours of beneficial trading.  Traders were still at work when US President Trump stated he’ll be meeting with Congressional Republicans to discuss possible tax reliefs including a “payroll tax cut or relief, substantial relief, very substantial relief”. Not a lot of detail in that, but coupled with the $8.3billion stimulus package signed on Friday for vaccine research and possible aid for airlines and cruise ship companies, it was enough recharge the optimism and let the indices recover half of yesterday’s losses.

If such a thing is a virtual impossibility, then it must logically be a finite improbability: OPEC+ had been considering trimming production by a further 1.5million barrels of oil per day starting in April, only they could not agree how to apportion the cuts.  With no deal and the existing agreement ending, both Saudi and Russia said they would instead maximise production adding over 3million barrels a day to supply. Oil plummeted to well below anyone’s full production costs. Surely there’s a chance it won’t happen? Well, when Russia didn’t dismiss further talks, oil rebounded over 8% on the possibility.

Market futures are trading up in Europe, down in the US & Asia as the oil price continues to rally
… while the Bank of England cuts rates by ½% to ¼% - weakening the pound slightly
… and Italy’s Premier Giuseppe Conte looks to double the stimulus support to £14billion
Chancellor Rishi Sunak delivers his first budget today with £600billion in infrastructure spending
China announces only 22 new cases of Covid-19 as 76% have now recovered, while…
… global cases nears 120,000 and Italian cases now over 10,000 and UK hits 382 cases
Biden won the Michigan & Mississippi primaries (Washington’s too-close-to-call) to lead overall
Don’t Panic, the thought’s only belated - Hitchhiker’s Guide to the Galaxy turned 42 on Sunday

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +35.22 (+3.01%) at 1,204 (YTD: -12.42%; 5YR: 34.2%)
MSCI AC World Equities (USD) up +241.18 (+2.85%) at 8,715 (YTD: -12.66%; 5YR: 35.9%)
Barclays Global Aggregate Bonds down -7.45 (-1.38%) at 532 (YTD: 3.88%; 5YR: 20.3%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +135.67 (+4.94%) at 2,882 (YTD: -10.79%; 5YR: 41.3%)    
NASDAQ up +393.58 (+4.95%) at 8,344 (YTD: -7.00%; 5YR: 72.0%)    
Euro STOXX 50 down -49.05 (-1.66%) at 2,910 (YTD: -22.30%; 5YR: -20.3%)    
FTSE 100 down -5.54 (-0.09%) at 5,960 (YTD: -20.98%; 5YR: -11.3%)    
CAC down -71.30 (-1.51%) at 4,637 (YTD: -22.44%; 5YR: -7.2%)    
DAX down -149.53 (-1.41%) at 10,475 (YTD: -20.93%; 5YR: -11.3%)    
Nikkei 225  down -451.06 (-2.27%) at 19,416 (YTD: -17.93%; 5YR: 3.7%)    
Hang Seng down -239.05 (-0.94%) at 25,153 (YTD: -10.77%; 5YR: 6.1%)    
MSCI Emerging Markets up +16.63 (+1.75%) at 965 (YTD: -13.47%; 5YR: 2.3%)    
    
Selected Government Bond Yields    
US 2 Year down -0.10 at 0.43 (began the year at 1.57; 5 years ago it was 0.68)    
US 10 Year down -0.14 at 0.67 (began the year at 1.92; 5 years ago it was 2.11)    
UK 10 Year up +0.08 at 0.24 (began the year at 0.82; 5 years ago it was 1.81)    
Germany 10 Year up +0.02 at -0.78 (began the year at -0.19; 5 years ago it was 0.21)    
France 10 Year up +0.02 at -0.29 (began the year at 0.12; 5 years ago it was 0.48)    
Italy 10 Year down -0.03 at 1.29 (began the year at 1.41; 5 years ago it was 1.13)    
Japan 10 Year up +0.01 at -0.07 (began the year at -0.02; 5 years ago it was 0.41)    
Barclays EM Basket up +0.07 at 3.87 (began the year at 4.27; 5 years ago it was 5.19)
    
Selected Currencies    
$ weakened -0.0024 versus € (-0.21%) at 1.1340 ($: YTD: -0.99%; 5YR: -7.7%)    
€ strengthened +0.0050 versus £ (-0.44%) at 1.1371 (€: YTD: 3.89%; 5YR: 24.5%)    
$ strengthened +0.0032 versus £ (+0.25%) at 1.2894 ($: YTD: 2.78%; 5YR: 13.5%)    
¥ weakened -0.3400 versus $ (-0.32%) at 104.7300 (¥: YTD: -3.68%; 5YR: 15.9%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.89 (-2.44%) at 35.66 (YTD: -46.31%; 5YR: -37.6%)    
WTI Crude ($/bbl) up +3.23 (+10.38%) at 34.36 (YTD: -43.73%; 5YR: -28.9%)    
Gold ($/ozt) up +6.99 (+0.42%) at 1664.94 (YTD: 9.33%; 5YR: 44.6%)    
Copper ($/mt) up +31.00 (+0.56%) at 5566.00 (YTD: -9.85%; 5YR: -3.5%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros