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13th May 2020

13/05/2020

Market Data and Morning Chat

Morning Chat

It’s because of the uncertainty principle – what’s that? I’m not sure! – Terry Pratchett wasn’t either. But there’s some certainty investors dislike uncertainty and it certainly seemed to trigger the disappointing late-market slide in US equities. To start, Dr. Anthony Fauci – a top US Covid-19 task-force member – warned against any quick reopening of the US economy in his Congressional testimony raising questions when it should be done. Then Lindsay Graham, Republican senior Senator for South Carolina, introduced legislation authorising Trump to impose sanctions on China if they don’t co-operate with the investigation into Covid-19 raising an uncertain heat again on trade-tensions!

Only in our dreams are we free, the rest of the time we need wages: Investors are dreaming of the end of lockdowns and a recovering global economy.  But Covid-19 is proving hard to shake! In parts of Asia, case numbers have re-escalated – enough to prompt China to require testing of everybody in Wuhan (that’s 11million tests!). Additionally, South Korea’s new cases rose at the fastest pace in over a month. Meanwhile, while good news for workers, Chancellor Rishi Sunak’s extension of the government furlough scheme highlights the potential for delay getting the economic engine ticking over again. Keep dreaming!

Five exclamation marks, the sure sign of an insane mind: But maybe some market moves are not so crazy. Oil rallying over new Saudi production cuts, with crude prices up nearly 7% yesterday – is a reasonable reaction to supply reductions.  The US Fed’s been speaking out against using negative rates, but gold has somewhat sensibly risen on the possibility.  Given surging tech shares account for over a quarter of US equities, but less than a tenth of Europe’s, it’s not loony to see the US outperforming. Oh, and it’s unfortunately rational to see retail UK sales fall given the lockdown.
 
Good news, bad news – Europe is following the US down, but the US is rebounding
… while Asia is trading pretty flat – guess that’s just news
Gilead is licencing Remdesivir to five generic manufacturers to boost production
Hot off the presses – the UK’s Q1 GDP caught a cold, down only 2.0% versus 2.6% estimate
… with the March estimate down only 5.8% versus the 7.9% analysts predicted
… while industrial production only slipped 4.2% in March versus 5.6% estimate
Vodafone (+8.7%) dials up some cheer growing profits and maintaining its hefty dividend
Duke Energy (0.2%) generates slightly less revenues on lower retailer use, but keeps dividend
Deutsche Post (+3.0%) delivers slight improvement to revenues and improved free cash flow
Allianz (-3.2%) property & casualty suffers a Covid-19 accident hurting overall profits
Sony (-0.1%) profits are down, but the PS5 is on track for Xmas and next year’s lockdown 

 

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -15.97 (-1.30%) at 1,208 (YTD: -12.13%; 5YR: 30.3%)
MSCI AC World Equities (USD) down -112.28 (-1.28%) at 8,686 (YTD: -12.96%; 5YR: 28.7%)
Barclays Global Aggregate Bonds up +1.56 (+0.30%) at 516 (YTD: 0.84%; 5YR: 14.7%)
 
Selected Equity Indices (Capital returns)
S&P 500 down -60.20 (-2.05%) at 2,870 (YTD: -11.16%; 5YR: 36.8%)
NASDAQ down -189.79 (-2.06%) at 9,003 (YTD: 0.33%; 5YR: 80.7%)
Euro STOXX 50 up +0.45 (+0.02%) at 2,884 (YTD: -22.99%; 5YR: -18.8%)
FTSE 100 up +55.04 (+0.93%) at 5,995 (YTD: -20.52%; 5YR: -13.7%)
CAC down -17.72 (-0.39%) at 4,473 (YTD: -25.18%; 5YR: -9.9%)
DAX down -5.49 (-0.05%) at 10,820 (YTD: -18.34%; 5YR: -4.7%)
Nikkei 225  down -88.20 (-0.43%) at 20,278 (YTD: -14.28%; 5YR: 2.6%)
Hang Seng up +45.46 (+0.19%) at 24,291 (YTD: -13.83%; 5YR: -10.9%)
MSCI Emerging Markets down -6.59 (-0.72%) at 909 (YTD: -18.42%; 5YR: -12.0%)
 
Selected Government Bond Yields
US 2 Year unchanged at 0.16 (began the year at 1.57; 5 years ago it was 0.58)
US 10 Year up +0.00 at 0.67 (began the year at 1.92; 5 years ago it was 2.29)
UK 10 Year down -0.02 at 0.25 (began the year at 0.82; 5 years ago it was 2.02)
Germany 10 Year up +0.00 at -0.51 (began the year at -0.19; 5 years ago it was 0.72)
France 10 Year down 0.00 at -0.03 (began the year at 0.12; 5 years ago it was 1.00)
Italy 10 Year down 0.00 at 1.89 (began the year at 1.41; 5 years ago it was 1.89)
Japan 10 Year down 0.00 at -0.01 (began the year at -0.02; 5 years ago it was 0.45)
Barclays EM Basket down -0.03 at 3.76 (began the year at 4.27; 5 years ago it was 5.11)
 
Selected Currencies
$ weakened -0.0002 versus € (-0.02%) at 1.0853 ($: YTD: 3.35%; 5YR: 4.6%)
€ strengthened +0.0012 versus £ (-0.11%) at 1.1316 (€: YTD: 4.39%; 5YR: 22.4%)
$ strengthened +0.0011 versus £ (+0.09%) at 1.2281 ($: YTD: 7.40%; 5YR: 22.0%)
¥ strengthened +0.2000 versus $ (+0.19%) at 107.1700 (¥: YTD: -1.32%; 5YR: 11.1%)
 
Selected Commodities
Brent Crude ($/bbl) up +0.11 (+0.40%) at 27.28 (YTD: -58.93%; 5YR: -58.6%)
WTI Crude ($/bbl) up +1.64 (+6.79%) at 25.78 (YTD: -57.78%; 5YR: -57.6%)
Gold ($/ozt) up +2.27 (+0.13%) at 1704.91 (YTD: 11.96%; 5YR: 40.0%)
Copper ($/mt) down -0.50 (-0.01%) at 5256.50 (YTD: -14.86%; 5YR: -18.4%)
 
 

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros