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16th July 2020

16/07/2020

Market Data and Morning Chat

Morning Chat

Vaccine and not herd: We don’t have a Covid-19 pandemic solution yet, but the last few days have seen reports citing Moderna garnering a 100% elicitation of antibodies in their safety test patients and Professor Sarah Gilbert’s Oxford University / Jenner Institute team are now in phase 3 trials of their candidate* with 1,100 patients. The upbeat news triggered hopes of a possible September vaccine and prompted a strong market rally with Covid-sensitive names shooting ahead.  The cruise lines – Royal Caribbean (+21.2%), Norwegian (+20.7%) and Carnival (+16.2%) were 1-2-3 on the S&P leaderboard, with American (+16.2%) & United airlines (+14.6%) 4-5.
 
* The Oxford vaccine - ChAdOx1nCov-19 – is an amazing bit of medical technology, taking a harmless chimp virus and altering it to have a Covid-19 surface spike protein to produce an antibody response. They’re ahead of the game because Professor Gilbert et al have been working for years on a MERS variant, so a change to Covid-19 needed only a small change..
 
Europe shooting up: European equities also posted a strong anti-viral day making gains that helped European markets play catch up with – and to an extent surpass – the recent US market rally. Covid-hit Aerospace industrials dominated the top flight performers again yesterday with aircraft parts-maker Safran (+6.7%), airline software scripter Amadeus (+6.1%) and Airbus (+4.6%) swooping ahead of the pack while BA’s parent International Consolidated Air flew to the top of the UK market.  Look more deeply, and gains were led by companies that see the greatest benefits if everyone were to eat, drink, shop, drive or fly more if Covid-free.
 
The health of the underlying economy: It’s unsurprising Covid-19 was yesterday’s focus (even AstraZeneca, up 5.2% gained on vaccine news) because there wasn’t much else to really draw focus. British and Italian inflation data wasn’t too much of a surprise. US industrial production and capacity utilisation was a little ahead of estimates, but those are also Covid-19 feel-good data points too. For that matter, so too was the much-better-than-expected 7.5million barrel crude oil inventory draw, as it also prompted a rally in the oil price. Only the mixed to better-than-hoped bank results gave any insight to the underlying economic conditions. 
 

After a few days' of big gains, equity futures are giving back some ground, down  ½ to 1%
… with China down 3.1% today despite the 245% leap in newly IPO’d chip maker SMIC
Just out – UK’s unemployment claimant count fell 28,100 – it was expected to rise 250,000!
… the unemployment rate held at 3.9% and employment fell only 125k versus 234k forecast
China did avoid a technical recession however as GDP grows 3.2% in Q2 after the -6.8% in Q1
… while June’s industrial production rose 4.8% but retail sales falls 1.8% (+0.3% expected) 
Twitter (+0.4%) though up overall, fell 2.9% on news of a major security breach
… with accounts of Biden, Obama, Jeff Bezos (of Amazon) & Elon Musk used in a bitcoin scam
As to banks, Goldman’s (+1.3%) saw their best trading desk results in years to lift earnings
… US Bancorp (+3.7%) was lifted by deposit growth, healthy fee revenue gains & flat expenses 
… Bank of New York Mellon (-5,4%) stumbled as the low rate environment hurt profit margins
Alcoa (+6.9%) relied on canning costs to boost cash flow to deal with the lockdown environment
Apple (+0.7%) won their €14billon EU tax case as the Irish taxation was not ruled to be state aid
Latest NBC national poll puts Biden ahead by 11% although Trump’s approval steady at 40.3% 
 

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +13.94 (+1.03%) at 1,363 (YTD: -0.92%; 5YR: 45.7%)
MSCI AC World Equities (USD) up +120.68 (+1.24%) at 9,855 (YTD: -1.24%; 5YR: 46.0%)
Barclays Global Aggregate Bonds up +0.91 (+0.17%) at 533 (YTD: 4.09%; 5YR: 21.4%)
 
Selected Equity Indices (Capital returns)

S&P 500 up +29.04 (+0.91%) at 3,227 (YTD: -0.13%; 5YR: 51.9%)
NASDAQ up +61.91 (+0.59%) at 10,550 (YTD: 17.59%; 5YR: 104.3%)
Euro STOXX 50 up +56.82 (+1.71%) at 3,378 (YTD: -9.80%; 5YR: -8.1%)
FTSE 100 up +112.90 (+1.83%) at 6,293 (YTD: -16.57%; 5YR: -7.4%)
CAC up +101.52 (+2.03%) at 5,109 (YTD: -14.54%; 5YR: -0.2%)
DAX up +233.62 (+1.84%) at 12,931 (YTD: -2.40%; 5YR: 10.4%)
Nikkei 225  down -189.00 (-0.82%) at 22,757 (YTD: -3.80%; 5YR: 10.5%)
Hang Seng down -336.49 (-1.32%) at 25,145 (YTD: -10.80%; 5YR: -0.1%)
MSCI Emerging Markets up +6.76 (+0.64%) at 1,066 (YTD: -4.34%; 5YR: 13.2%)
 
Selected Government Bond Yields

US 2 Year down 0.00 at 0.15 (began the year at 1.57; 5 years ago it was 0.66)
US 10 Year down -0.01 at 0.62 (began the year at 1.92; 5 years ago it was 2.35)
UK 10 Year up +0.02 at 0.17 (began the year at 0.82; 5 years ago it was 2.08)
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 -0.14 (began the year at 0.12; 5 years ago it was 1.14)
Italy 10 Year up +0.00 at 1.20 (began the year at 1.41; 5 years ago it was 1.99)
Japan 10 Year down -0.01 at 0.01 (began the year at -0.02; 5 years ago it was 0.44)
Barclays EM Basket down -0.01 at 3.73 (began the year at 4.27; 5 years ago it was 5.35)
 
Selected Currencies

$ strengthened +0.0004 versus € (+0.04%) at 1.1403 ($: YTD: -1.55%; 5YR: -4.8%)
€ strengthened +0.0025 versus £ (-0.23%) at 1.1008 (€: YTD: 7.31%; 5YR: 30.4%)
$ strengthened +0.0033 versus £ (+0.26%) at 1.2553 ($: YTD: 5.35%; 5YR: 19.6%)
¥ strengthened +0.0300 versus $ (+0.03%) at 106.9100 (¥: YTD: -1.56%; 5YR: 16.1%)
 
Selected Commodities

Brent Crude ($/bbl) up +0.03 (+0.07%) at 43.73 (YTD: -34.16%; 5YR: -22.5%)
WTI Crude ($/bbl) up +0.91 (+2.26%) at 41.20 (YTD: -32.53%; 5YR: -19.9%)
Gold ($/ozt) down -3.97 (-0.22%) at 1808.63 (YTD: 18.77%; 5YR: 57.9%)
Copper ($/mt) down -112.50 (-1.73%) at 6386.00 (YTD: 3.43%; 5YR: 15.5%)
 
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