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13th February 2020

13/02/2020

Market Data and Morning Chat

Morning Chat 

A developing S-curve? The John Hopkins Covid-19 dashboard has been a key destination for news on the developing epidemic. Google it if you haven’t.  It provides data on numbers and locations of confirmed cases, recoveries and, tragically, deaths.  What is a relief is the reported cases trend; a definite s-curve slowing is becoming apparent as the global numbers are passing 45,000 cases.  Investors also appear comforted. We’ve already seen the equity markets rally, but now US treasury yields are appearing to rally after nearly revisiting the all-time lows. Let’s hope China’s broadening of Covid-19 data collection doesn’t spark fresh fears. 

Bond traders were not the only optimists (maybe just the most surprising): The only sign of red appeared to be the VIX – often called a fear index – which records the expected level of market volatility or noisiness. It’s supposed to be a leading indicator of investor sentiment. The VIX index dropped 9.5% yesterday and has slid back from the medium-high 18.6 at end-January to a slightly-higher-than-usual 13.7 now as the market starts to unwind the Covid-19 fears (hopefully accurately).  Equity markets responded by posting further gains, rising ¾ to 1% with many indices and stocks closing at new all-time records.

Drilling down on the oil market: Oil prices have been a quiet victim of 2020.  West Texas Intermediate started the year around $62½ and Brent crude $70. The Covid-19 fears prompted expectations of a noticeable economic slowdown and in turn a reduction in demand for oil.  Result? Prices for West Texas and Brent dropped to $49½ and $53½ respectively – significant 20% plus declines.  OPEC has responded with calls to cut production which, coupled with a slowing of new Covid-19 cases has prompted a reasonable recovery. If the cuts come through – and Libyan production remains offline – we might see a recovery.

The broadened Chinese definition of Covid-19 cases now includes “clinically diagnosed” cases
… which overnight boosted the number infected by over 13,000 to nearly 60,000 
… as they added the entire new category of patients in one hit to the data
… Not that it has helped the outlook this morning with equity futures pointing down ¼ to ½%
Kering (+6.3%) end up putting on a great show yesterday after results show a lesser Covid-19 hit 
Cap Gemini (+1.5%) rose on upbeat 2020 view thanks to IT partnerships with AWS & Microsoft
TripAdvisor (+2.2%) shares travelled up as results neatly beat their admittedly lowered bar
Cisco (+1.6%) saw shares rerouted lower but still up after a slightly sluggish forecast for 2020
Nestle (-1.3%) could smell the coffee of slower Chinese sales than hoped pushed back growth 
… and they also discontinued reduced sugar chocolates over weak demand (obviously)
Plus a further reminder – the Morning Chat takes a half-term hiatus to enjoy proper chocs!!

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +8.65 (+0.61%) at 1,427 (YTD: 3.80%; 5YR: 58.3%)
MSCI AC World Equities (USD) up +58.29 (+0.57%) at 10,318 (YTD: 3.40%; 5YR: 57.4%)
Barclays Global Aggregate Bonds down -0.72 (-0.14%) at 514 (YTD: 0.37%; 5YR: 13.4%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +21.70 (+0.65%) at 3,379 (YTD: 4.60%; 5YR: 61.2%)    
NASDAQ up +87.02 (+0.90%) at 9,726 (YTD: 8.40%; 5YR: 98.7%)    
Euro STOXX 50 up +28.59 (+0.75%) at 3,854 (YTD: 2.92%; 5YR: 11.8%)    
FTSE 100 up +34.93 (+0.47%) at 7,534 (YTD: -0.11%; 5YR: 9.6%)    
CAC up +49.97 (+0.83%) at 6,105 (YTD: 2.12%; 5YR: 28.3%)    
DAX up +121.94 (+0.89%) at 13,750 (YTD: 3.78%; 5YR: 25.4%)    
Nikkei 225  down -33.48 (-0.14%) at 23,828 (YTD: 0.72%; 5YR: 33.0%)    
Hang Seng down -81.18 (-0.29%) at 27,742 (YTD: -1.59%; 5YR: 12.4%)    
MSCI Emerging Markets up +10.29 (+0.94%) at 1,110 (YTD: -0.45%; 5YR: 12.5%)    
    
Selected Government Bond Yields    
US 2 Year down -0.03 at 1.41 (began the year at 1.57; 5 years ago it was 0.64)    
US 10 Year down -0.04 at 1.59 (began the year at 1.92; 5 years ago it was 2.05)    
UK 10 Year up +0.04 at 0.61 (began the year at 0.82; 5 years ago it was 1.68)    
Germany 10 Year down -0.02 at -0.40 (began the year at -0.19; 5 years ago it was 0.34)
France 10 Year down -0.02 at -0.16 (began the year at 0.12; 5 years ago it was 0.64)    
Italy 10 Year down -0.01 at 0.90 (began the year at 1.41; 5 years ago it was 1.60)    
Japan 10 Year up +0.00 at -0.04 (began the year at -0.02; 5 years ago it was 0.42)    
Barclays EM Basket up +0.00 at 3.97 (began the year at 4.27; 5 years ago it was 5.08)
    
Selected Currencies    
$ strengthened +0.0002 versus € (+0.02%) at 1.0877 ($: YTD: 3.13%; 5YR: 4.7%)    
€ strengthened +0.0004 versus £ (-0.03%) at 1.1915 (€: YTD: -0.86%; 5YR: 13.3%)    
$ strengthened +0.0006 versus £ (+0.05%) at 1.2960 ($: YTD: 2.28%; 5YR: 15.8%)    
¥ strengthened +0.2000 versus $ (+0.18%) at 109.8400 (¥: YTD: 1.15%; 5YR: 8.1%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.57 (-1.01%) at 55.63 (YTD: -16.25%; 5YR: -6.4%)    
WTI Crude ($/bbl) up +1.23 (+2.46%) at 51.17 (YTD: -16.20%; 5YR: -0.1%)    
Gold ($/ozt) up +4.44 (+0.28%) at 1572.71 (YTD: 3.28%; 5YR: 27.9%)    
Copper ($/mt) up +19.00 (+0.33%) at 5764.00 (YTD: -6.64%; 5YR: 0.4%)    
    
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