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11th September 2020

11/09/2020

Market Data and Morning Chat

A claim excuse: Wednesday was a good day for equities, Thursday – not so much, well, at least for Americans.  Asian markets offered a mixed starter as the Chinese didn’t deliver but there was a tasty Japanese gain of 0.9% thanks to a better-than-expected 6.3% rise in machine orders.  Europeans, waiting for ECB President Christine Lagarde were no doubt found her optimistic tone appealing so put a modicum of green on the screen.  Fingers crossed, US initial jobless claims.  850,000 forecast, 884,000 recorded and continuing claims were disappointing too. Oh, and Democrats blocked the stimulus bill knocking equities into the close.

Getting pounded: Summer sterling traded around $1.25 while fading from €1.14 to €1.10. August sterling saw a quid pro quo – improving investor sentiment fostering a desire for UK currency. September opened at $1.35 and €1.13. Now? $1.28 (5% weaker) and €1.08 (4%). The pound’s trouble is spilling from the Brexit negotiations and specifically the newly-introduced the Internal Markets Bill.  The EU have declared a three-week deadline to withdraw the legislation while the government’s said no – the legislation ensures Northern Ireland is an integral part of the UK.  School-boy error or negotiating tactic to break the deadlock? Time will tell.

Brimful of brinksmanship: It’s too early to tell whether the Internal Markets Bill is a prod for the EU to accept UK’s new-found sovereignty in the Brexit talks or not, but it does echo how politics is being played since Trump showed up at the White House.  Yesterday alone, Trump was in the news declaring he won’t extend TikTok’s deadline for the sale of its US business, Mediterranean EU nations issuing an ultimatum against Turkey over energy exploration and Democrats cheered their defeating of the Republican bill.  You’d think there’d be a red ink shortage over all those lines declared.

Asian markets up ½%, but futures are looking mixed, with Europe down ¼% and the US up ½%
 The EIA oil inventories rise of 1/2million barrels confirmed a supply build trimming prices ¢75
 Some good news just out – UK GDP grew 6.6% in July which was much as expected…
 …while industrial production beat expectations rising 5.2% versus the 4.1% forecast
 … manufacturing jumped 6.3% & construction built a 17.6% increase versus 10.0% hoped for
 … and Japan is hoping to conclude a post-Brexit trade deal with the UK later today
 Morrison’s (-4.6%) results were grosser over negative free cash flow by paying suppliers sooner
 …  the results also hit Sainsbury’s (-2.0%) meaning shareholders must live well for less
 … & Tesco (-1.6%) found it the little bit that didn’t help as grocers were the index laggards
 Brexit’s not the only messy divorce, the foregone LVMH-Tiffany deal may head to the law courts
 Trump’s election probabilities fade to 25 in 100 as Biden is favoured to with the White House…
 … as Biden’s odds in the important swing-state of Florida improve significantly  

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Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -14.07 (-1.00%) at 1,394 (YTD: 1.33%; 5YR: 63.2%)
MSCI AC World Equities (USD) down -111.12 (-1.08%) at 10,179 (YTD: 2.01%; 5YR: 64.6%)
Barclays Global Aggregate Bonds up +0.60 (+0.11%) at 541 (YTD: 5.83%; 5YR: 21.3%)

Selected Equity Indices (Capital returns)
S&P 500 down -59.77 (-1.76%) at 3,339 (YTD: 3.36%; 5YR: 70.3%)
NASDAQ down -221.97 (-1.99%) at 10,920 (YTD: 21.70%; 5YR: 126.4%)
Dow Jones Industrial down -405.89 (-1.45%) at 27,535 (YTD: -3.52%; 5YR: 67.6%)
Euro STOXX 50 down -12.06 (-0.36%) at 3,313 (YTD: -11.55%; 5YR: 3.9%)
FTSE 100 down -9.52 (-0.16%) at 6,003 (YTD: -20.41%; 5YR: -1.9%)
CAC down -19.05 (-0.38%) at 5,024 (YTD: -15.96%; 5YR: 10.4%)
DAX down -28.32 (-0.21%) at 13,209 (YTD: -0.30%; 5YR: 30.5%)
Nikkei 225  up +171.02 (+0.74%) at 23,406 (YTD: -1.06%; 5YR: 28.2%)
Hang Seng up +168.38 (+0.69%) at 24,482 (YTD: -13.15%; 5YR: 13.8%)
MSCI Emerging Markets down -0.43 (-0.04%) at 1,085 (YTD: -2.63%; 5YR: 35.2%)

Selected Government Bond Yields
US 2 Year down 0.00 at 0.14 (began the year at 1.57; 5 years ago it was 0.71)
US 10 Year up +0.00 at 0.68 (began the year at 1.92; 5 years ago it was 2.19)
UK 10 Year down -0.01 at 0.23 (began the year at 0.82; 5 years ago it was 1.83)
Germany 10 Year down -0.03 at -0.46 (began the year at -0.19; 5 years ago it was 0.65)
France 10 Year down -0.03 at -0.17 (began the year at 0.12; 5 years ago it was 1.06)
Italy 10 Year down -0.03 at 0.97 (began the year at 1.41; 5 years ago it was 1.83)
Japan 10 Year unchanged at 0.02 (began the year at -0.02; 5 years ago it was 0.34)
Barclays EM Basket down 0.00 at 3.77 (began the year at 4.27; 5 years ago it was 5.48)

Selected Currencies
$ strengthened +0.0020 versus € (+0.17%) at 1.1838 ($: YTD: -5.42%; 5YR: -4.3%)
€ weakened -0.0008 versus £ (+0.07%) at 1.0828 (€: YTD: 9.10%; 5YR: 25.6%)
$ strengthened +0.0011 versus £ (+0.09%) at 1.2819 ($: YTD: 3.35%; 5YR: 16.9%)
¥ unchanged 0.0000 versus $ (0.00%) at 106.1800 (¥: YTD: -2.26%; 5YR: 13.6%)

Selected Commodities
Brent Crude ($/bbl) up +0.13 (+0.33%) at 39.18 (YTD: -41.01%; 5YR: -17.4%)
WTI Crude ($/bbl) down -0.75 (-1.97%) at 37.30 (YTD: -38.91%; 5YR: -18.8%)
Gold ($/ozt) down -10.35 (-0.53%) at 1943.73 (YTD: 27.64%; 5YR: 75.9%)
Copper ($/mt) down -65.50 (-0.97%) at 6668.50 (YTD: 8.01%; 5YR: 23.5%)

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