!css

16th March 2020

16/03/2020

Market Data and Morning Chat

Morning Chat 

A tough week to bear: The global Covid-19 situation deteriorated significantly last week. While new Chinese cases appeared to tumble to around 20 a day, and South Korea’s to around 100, the new cases in Europe and the US raced higher. Add in the failed OPEC+ talks, Saudi Arabia & Russia’s declared intent to massively boost production  and the corresponding collapse in the oil price to $30 and equities faced a storm of selling pressure. By Thursday’s close, global equities had entered a bear market – a fall of 20% or more from the peak – while bonds and gold raced higher.

VIX, gold medicine: The VIX index, a measure of market volatility often referred to as a fear index, raced up to an intra-day high of 77.57 – a level only surpassed during 2008. Then came US President Donald Trump’s declaration of a state of national emergency. Global equities started to recover, with European markets up ¾-2½% & Italy rallying over 7%, but with their longer trading day, US equities saw their biggest one-day gain since October 28, 2008, leaping over 9%. The VIX index dropped to 57.83, while gold has retraced all but $11 of its 2020 gains falling to $1533. 

The prospects: The global Covid-19 situation will remain the significant driver, but authorities are responding including the Fed again cutting the Fed Funds rate (it’s now nil) and triggering a $700billion quantitative easing program (not that market futures seem too keen) and the Bank of Canada also trimming rates. This week will also see some economic data that may offer a limited distraction. The US JOLTS report on job openings, the UK unemployment data, German investor confidence and Italian factory orders could have an impact.  Moreover, further stimulus plans – such as from Japan, Switzerland, & Brazil could also help sentiment.

Market futures are not great, down 4½-5%, but they were down by 7-8% or more yesterday
China’s industrial output fell 13.5% Jan/Feb from a year earlier with retail sales down 20.5%
The Bank of Japan announce a doubling their annual pace of ETF purchases to ¥12trillion
LVMH (+4.4%) announced it will use its cosmetic production facilities to produce hand sanitizer

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +58.16 (+5.49%) at 1,117 (YTD: -18.78%; 5YR: 22.5%)
MSCI AC World Equities (USD) up +448.29 (+5.94%) at 7,996 (YTD: -19.87%; 5YR: 22.6%)
Barclays Global Aggregate Bonds down -5.54 (-1.07%) at 514 (YTD: 0.47%; 5YR: 16.3%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +230.38 (+9.29%) at 2,711 (YTD: -16.09%; 5YR: 30.3%)    
NASDAQ up +673.07 (+9.35%) at 7,875 (YTD: -12.23%; 5YR: 59.7%)    
Euro STOXX 50 up +40.79 (+1.60%) at 2,586 (YTD: -30.95%; 5YR: -30.2%)    
FTSE 100 up +128.63 (+2.46%) at 5,366 (YTD: -28.85%; 5YR: -21.1%)    
CAC up +74.10 (+1.83%) at 4,118 (YTD: -31.11%; 5YR: -18.6%)    
DAX up +70.95 (+0.77%) at 9,232 (YTD: -30.32%; 5YR: -24.1%)    
Nikkei 225  down -429.01 (-2.46%) at 17,002 (YTD: -28.13%; 5YR: -11.7%)    
Hang Seng down -1098.52 (-4.57%) at 22,934 (YTD: -18.64%; 5YR: -4.2%)    
MSCI Emerging Markets up +8.07 (+0.91%) at 891 (YTD: -20.05%; 5YR: -5.2%)    
    
Selected Government Bond Yields    
US 2 Year down -0.19 at 0.30 (began the year at 1.57; 5 years ago it was 0.65)    
US 10 Year down -0.21 at 0.75 (began the year at 1.92; 5 years ago it was 2.07)    
UK 10 Year up +0.15 at 0.41 (began the year at 0.82; 5 years ago it was 1.68)    
Germany 10 Year down -0.03 at -0.58 (began the year at -0.19; 5 years ago it was 0.28)
France 10 Year up +0.06 at 0.07 (began the year at 0.12; 5 years ago it was 0.52)    
Italy 10 Year up +0.12 at 1.90 (began the year at 1.41; 5 years ago it was 1.18)    
Japan 10 Year down -0.01 at 0.01 (began the year at -0.02; 5 years ago it was 0.41)    
Barclays EM Basket up +0.12 at 4.38 (began the year at 4.27; 5 years ago it was 5.17)
    
Selected Currencies    
$ weakened -0.0085 versus € (-0.77%) at 1.1166 ($: YTD: 0.56%; 5YR: -5.4%)    
€ strengthened +0.0083 versus £ (-0.75%) at 1.1061 (€: YTD: 6.80%; 5YR: 26.7%)    
$ weakened -0.0001 versus £ (-0.01%) at 1.2349 ($: YTD: 6.89%; 5YR: 16.8%)    
¥ strengthened +1.2400 versus $ (+1.17%) at 106.4200 (¥: YTD: -2.03%; 5YR: 14.0%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -2.16 (-6.44%) at 31.39 (YTD: -52.74%; 5YR: -40.3%)    
WTI Crude ($/bbl) up +0.23 (+0.73%) at 31.73 (YTD: -48.03%; 5YR: -29.2%)    
Gold ($/ozt) up +11.53 (+0.76%) at 1533.83 (YTD: 0.72%; 5YR: 32.9%)    
Copper ($/mt) up +20.00 (+0.37%) at 5460.00 (YTD: -11.56%; 5YR: -6.8%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros