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15th July 2020

15/07/2020

Market Data and Morning Chat

Morning Chat

Living in Moderna times: Something we haven’t seen too often of late – the Dow Jones outperforming other US indices.  It was bolstered by the global rise in energy, materials and healthcare stocks (indices like the Nasdaq are underexposed to the former two) and similarly led UK equities to outperform the continental Europeans. Global energy stocks powered up 2.7% as the OPEC+ meeting’s opening remarks appeared to reassure investors production cuts will remain. Global materials stocks proved ore-fully good, rising 1.2% on near-record Chinese iron imports. Meanwhile healthcare stocks (+1.1%) rallied after Moderna injected positive news on their Covid-19 vaccine progress. 
 
Not to shrink from it: 
Yes, UK equities outperformed the continentals and they even registered a gain unlike the Europeans, but there’s bigger news afoot.  The UK GDP numbers showed a massive slowing of the economy, down 19.1% in three months. Wholesale & retail trade down 71.0%. Food & beverages down 69.3% on restaurant closures. The education sector down 37.8% on school closures. Even the healthcare sector down 31.4% on fewer elective surgeries. It’s pushed UK 2-year bond yields below Japan’s.  Nonetheless,  the GDP numbers are in the ballpark of expectations, we just need the recovery to play there too. 
 
JP more-gain and dry wells: 
The bank reports have started. JP Morgan, up 1.6%, broke Q1’s amazing trading revenues record by doubling income from fixed-income & equity sales this quarter last year. They also set a record for provisions (breaking last quarter’s record), but overall results were better-than-forecast. Citigroup (-2.8%) also saw significant trading gains – especially from fixed-income – and better-than-hoped results, but they also set those trading profits and more aside for provisions. Meanwhile, Wells Fargo’s stagecoach cracked an axle as the bank misses estimates with the first loss since 2008 as profits dried up forcing an 80% dividend cut.  
 
 
Equity futures are showing a solid ¾ to 1½% upswing this morning on positive vaccine news
 
Moderna (+21.7%) surges after all patients produce antibodies in covid-19 vaccine safety test
 
… giving the cruise lines and other travel stocks a healthy rally – Carnival was up 5.4%
 
UK inflation wears a higher 0.6% year-on-year rate versus 0.4% expected on clothing costs…  
 
… while US inflation copies us at 0.6%, also marginally higher than hoped as core inflation rises
 
… but June’s 2.4% UK producer input price inflation much lower than the 3.0% predicted
 
US President Trump signs bill to end Hong Kong’s special status and sanction Chinese officials
 
… while Chinese media calls for “painful” retaliation on UK for banning Huawei from 5G network
 
… and China moves to tax Hong Kong residents on their global income at 45%, a 15% jump
 
Ocado (-2.2%) gains “years of growth” as lockdown revenues jump 27% & retail profits double 
 
… but posts £41million pre-tax loss due to costs of expanding overseas licencing business
 
Water tech firm Xylem (+8.9%) spurts up on initial results showing dilution of expected loss
 
ASML (-2.9% pre-results) announce forecast-beating earnings and operations “back to normal”

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +7.69 (+0.57%) at 1,349 (YTD: -1.93%; 5YR: 45.4%)
MSCI AC World Equities (USD) up +73.70 (+0.76%) at 9,735 (YTD: -2.45%; 5YR: 45.4%)
Barclays Global Aggregate Bonds up +0.77 (+0.14%) at 532 (YTD: 3.91%; 5YR: 21.0%)
 
Selected Equity Indices (Capital returns)

S&P 500 up +42.30 (+1.34%) at 3,198 (YTD: -1.03%; 5YR: 52.3%)
NASDAQ up +97.74 (+0.94%) at 10,489 (YTD: 16.90%; 5YR: 105.7%)
Euro STOXX 50 down -28.61 (-0.85%) at 3,321 (YTD: -11.31%; 5YR: -7.5%)
FTSE 100 up +3.56 (+0.06%) at 6,180 (YTD: -18.07%; 5YR: -8.5%)
CAC down -48.77 (-0.96%) at 5,007 (YTD: -16.24%; 5YR: 0.2%)
DAX down -102.61 (-0.80%) at 12,697 (YTD: -4.16%; 5YR: 10.0%)
Nikkei 225  up +371.88 (+1.65%) at 22,959 (YTD: -2.95%; 5YR: 14.3%)
Hang Seng up +10.28 (+0.04%) at 25,488 (YTD: -9.58%; 5YR: 1.7%)
MSCI Emerging Markets down -11.84 (-1.11%) at 1,060 (YTD: -4.95%; 5YR: 13.0%)
 
Selected Government Bond Yields
US 2 Year unchanged at 0.16 (began the year at 1.57; 5 years ago it was 0.63)
US 10 Year up +0.00 at 0.63 (began the year at 1.92; 5 years ago it was 2.35)
UK 10 Year down -0.04 at 0.15 (began the year at 0.82; 5 years ago it was 2.12)
Germany 10 Year up +0.00 at -0.45 (began the year at -0.19; 5 years ago it was 0.83)
France 10 Year down 0.00 at -0.13 (began the year at 0.12; 5 years ago it was 1.14)
Italy 10 Year down 0.00 at 1.21 (began the year at 1.41; 5 years ago it was 2.00)
Japan 10 Year up +0.00 at 0.02 (began the year at -0.02; 5 years ago it was 0.45)
Barclays EM Basket down 0.00 at 3.75 (began the year at 4.27; 5 years ago it was 5.36)
 
Selected Currencies

$ strengthened +0.0004 versus € (+0.04%) at 1.1399 ($: YTD: -1.51%; 5YR: -4.1%)
€ weakened -0.0028 versus £ (+0.25%) at 1.1032 (€: YTD: 7.08%; 5YR: 29.4%)
$ weakened -0.0028 versus £ (-0.22%) at 1.2576 ($: YTD: 5.18%; 5YR: 19.5%)
¥ weakened -0.0700 versus $ (-0.07%) at 107.2700 (¥: YTD: -1.22%; 5YR: 15.5%)
 
Selected Commodities

Brent Crude ($/bbl) up +0.06 (+0.14%) at 43.07 (YTD: -35.16%; 5YR: -23.4%)
WTI Crude ($/bbl) up +0.19 (+0.47%) at 40.29 (YTD: -34.02%; 5YR: -24.0%)
Gold ($/ozt) down -0.70 (-0.04%) at 1808.41 (YTD: 18.75%; 5YR: 57.6%)
Copper ($/mt) down -72.50 (-1.10%) at 6498.50 (YTD: 5.26%; 5YR: 16.8%)
 
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