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17th March 2020

17/03/2020

Market Data and Morning Chat

Morning Chat 

Maybe if he was briefer: The week started with futures showing another day of deep red.  The US Fed’s rate cut and $700billion of quantitative easing co-ordinated with other major central banks was met with elevated fear rather than any sense of relief.  Within minutes, European equities were down 8-10% but markets were clawing back, recovering 4-5% of the lost ground. The US, also down massively at the open, was similarly clawing back – or was until Trump started briefing. Unfortunately, he was too dismissive of recession possibilities. Investors didn’t like that, leading US equities to tumble and close down 12%.

…or just stuck to tweets: Later, though, Donald Trump tweeted the US “will be powerfully supporting those industries, like Airlines…” and futures started recovering gaining 3-4%. Responding to the airlines’ support request helps and White House advisor Larry Kudlow along with Nancy Pelosi and Treasury Secretary Steven Mnuchin have been holding talks to address the US airlines’ request for £47billion in aid. Over in Italy, the government is looking to spend £1.8 to support Alitalia as part of a plan of renationalisation. Here in the UK, Virgin Atlantic CEO Shai Weiss said airlines might need £7.5billion of support as well.

A dividend to yield for? Late November 2008, the UK equity actual dividend yield hit 6.1%, higher than the then prevailing 3.1% 10-year bond yield. Certainly it made equities an attractive proposition, although the ultimate low was a little lower and a little later.  Now, UK equities yield 5.8%. The 10-year? 0.4%. Consider the US. The Americans have really shifted to buybacks, so today’s 2.5% dividend plays March 2009’s 4.1%, but their 10-year? Yields fell from 3% then to 0.7% today. Oh, and March 2009 was the low in US - and UK - equities.  Maybe a dividend to yield for?

As noted above, US futures are limit up, but so too the Europeans gaining around 3½%
… and rallying up as we near the market open – we could do with some good news…
… By the way, despite the 4% down day in the UK, 16% of the index actually posted gains, and
… trade-weighted sterling’s 7¾% fall since late-Feb helps lift the value of international assets

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -102.62 (-9.19%) at 1,014 (YTD: -26.24%; 5YR: 11.3%
MSCI AC World Equities (USD) down -759.77 (-9.50%) at 7,236 (YTD: -27.49%; 5YR: 11.1%)
Barclays Global Aggregate Bonds up +1.24 (+0.24%) at 515 (YTD: 0.72%; 5YR: 16.5%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -324.89 (-11.98%) at 2,386 (YTD: -26.14%; 5YR: 15.0%)    
NASDAQ down -970.28 (-12.32%) at 6,905 (YTD: -23.05%; 5YR: 39.8%)    
Euro STOXX 50 down -135.65 (-5.25%) at 2,450 (YTD: -34.57%; 5YR: -33.3%)    
FTSE 100 down -215.03 (-4.01%) at 5,151 (YTD: -31.71%; 5YR: -24.7%)    
CAC down -236.90 (-5.75%) at 3,881 (YTD: -35.07%; 5YR: -22.8%)    
DAX down -489.83 (-5.31%) at 8,742 (YTD: -34.02%; 5YR: -27.0%)    
Nikkei 225  up +9.49 (+0.06%) at 17,012 (YTD: -28.09%; 5YR: -12.5%)    
Hang Seng up +221.26 (+0.96%) at 23,285 (YTD: -17.40%; 5YR: -2.6%)    
MSCI Emerging Markets down -58.01 (-6.51%) at 833 (YTD: -25.25%; 5YR: -12.2%)    
    
Selected Government Bond Yields    
US 2 Year up +0.03 at 0.39 (began the year at 1.57; 5 years ago it was 0.67)    
US 10 Year up +0.09 at 0.81 (began the year at 1.92; 5 years ago it was 2.05)    
UK 10 Year up +0.03 at 0.44 (began the year at 0.82; 5 years ago it was 1.68)    
Germany 10 Year up +0.04 at -0.42 (began the year at -0.19; 5 years ago it was 0.28)    
France 10 Year up +0.06 at 0.22 (began the year at 0.12; 5 years ago it was 0.53)    
Italy 10 Year down -0.10 at 2.06 (began the year at 1.41; 5 years ago it was 1.27)    
Japan 10 Year down 0.00 at 0.01 (began the year at -0.02; 5 years ago it was 0.42)    
Barclays EM Basket up +0.21 at 4.58 (began the year at 4.27; 5 years ago it was 5.15)
    
Selected Currencies    
$ strengthened +0.0023 versus € (+0.21%) at 1.1136 ($: YTD: 0.83%; 5YR: -5.1%)    
€ weakened -0.0011 versus £ (+0.10%) at 1.0970 (€: YTD: 7.68%; 5YR: 26.9%)    
$ strengthened +0.0020 versus £ (+0.16%) at 1.2215 ($: YTD: 7.90%; 5YR: 17.2%)    
¥ weakened -0.8800 versus $ (-0.82%) at 106.8400 (¥: YTD: -1.63%; 5YR: 13.6%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +1.46 (+5.23%) at 29.39 (YTD: -55.75%; 5YR: -42.7%)    
WTI Crude ($/bbl) down -3.03 (-9.55%) at 28.70 (YTD: -53.00%; 5YR: -34.6%)    
Gold ($/ozt) down -4.57 (-0.31%) at 1487.80 (YTD: -2.30%; 5YR: 29.5%)    
Copper ($/mt) down -169.50 (-3.10%) at 5290.50 (YTD: -14.31%; 5YR: -9.5%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros