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1st April 2020

01/04/2020

Market Data and Morning Chat

Morning Chat

Barnier joins the Orchestre National de France: OK, I may have misinterpreted his twitter feed, it is April. However Brexit – remember that – continues rumbling on under the headlines and it’s helped tackle the Covid-19 outbreak; last year’s hard-Brexit planning helped lay the foundations to tackle the logistical challenges we’re facing now. Beyond that, the European People’s Party – the party of Merkel and Varadkar – is pushing for a Brex-tension to compensate for the coronavirus impact. As, despite trade deal negotiations continuing by telephone, Johnson’s summer deadline appears overly challenging. Oh, do check Barnier’s twitter feed though, the orchestra idea’s not so far-fetched.

Yes, yes, but what about the markets? Equities saw a mixed day, with most major markets closing up on less negative Italian Covid-19 news while US and Japanese stocks slid.  The virus news also trimmed a little off the gold price, while oil prices found a few additional pennies – probably in relief at the not-unusually-large inventory increase. Compared to recent days, the moves were modest. Whew.  The economic news wasn’t too bad either. Japan’s February retail sales were up 1.7% not down 1.2% as thought. Chinese PMIs rebounded and the Chicago PMI really was nowhere near a bad as expected.

Hung, drawn and quartered depends on the execution There’s no hiding from a tough quarter – the 20% quarterly decline in UK equities is the worst since 1987, since 2002 for Germany (DAX) and since 2008 for the US (S&P500) – hey, that’s pretty recent! It shows the wild equity ride, while substantial, is certainly not unparalleled. Moreover, for sterling investors, the dollar’s strength countered 6% of the US slip, while the Euro added 4% back on European investments.  Moreover, UK government bonds generated decent 6% gains (1¼% for short-dated bonds) whilst US bonds garnered 8½% (plus the dollar) and gold offered 12% in sterling terms!

Futures point to a weaker opening after Trump warms of a “painful” couple of weeks ahead
...but a fourth $2trillion stimulus pakage targeting "big & bold" infrastructure plans was coming
… he also noted speaking with Russian & Saudi leaders with talks over oil  upcoming. Hmmm.
Bond issuance topped $¾trillion last quarter with high-yield rate premiums jumping around 2.5%
Japan’s Large Manufacturer Q1 Tankan sentiment survey, while weak, actually improved on Q4
…while China’s Manufacturing PMI rebounded back above 50 versus the 45.5 expected
German February retail sales – just before their outbreak – were up 1.2% versus 0.1% expected
… Highlighting travel sector problems, Indonesian tourist arrivals dropped 28.9% in February

 
Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -6.01 (-0.54%) at 1,102 (YTD: -19.86%; 5YR: 21.0%)
MSCI AC World Equities (USD) down -75.08 (-0.94%) at 7,890 (YTD: -20.93%; 5YR: 20.9%)
Barclays Global Aggregate Bonds down -1.48 (-0.29%) at 510 (YTD: -0.33%; 5YR: 13.6%)
 
Selected Equity Indices (Capital returns)
S&P 500 down -42.06 (-1.60%) at 2,585 (YTD: -20.00%; 5YR: 25.5%)
NASDAQ down -74.05 (-0.95%) at 7,700 (YTD: -14.18%; 5YR: 57.8%)
Euro STOXX 50 up +21.28 (+0.77%) at 2,787 (YTD: -25.59%; 5YR: -25.0%)
FTSE 100 up +108.22 (+1.95%) at 5,672 (YTD: -24.80%; 5YR: -16.7%)
CAC up +17.61 (+0.40%) at 4,396 (YTD: -26.46%; 5YR: -13.2%)
DAX up +119.87 (+1.22%) at 9,936 (YTD: -25.01%; 5YR: -17.2%)
Nikkei 225  down -463.18 (-2.45%) at 18,454 (YTD: -21.99%; 5YR: -3.1%)
Hang Seng down -257.47 (-1.09%) at 23,346 (YTD: -17.18%; 5YR: -6.9%)
MSCI Emerging Markets up +16.55 (+1.99%) at 849 (YTD: -23.87%; 5YR: -13.7%)
 
Selected Government Bond Yields

US 2 Year down -0.01 at 0.23 (began the year at 1.57; 5 years ago it was 0.54)
US 10 Year down -0.04 at 0.63 (began the year at 1.92; 5 years ago it was 1.86)
UK 10 Year up +0.02 at 0.36 (began the year at 0.82; 5 years ago it was 1.54)
Germany 10 Year up +0.00 at -0.47 (began the year at -0.19; 5 years ago it was 0.17)
France 10 Year down 0.00 at -0.02 (began the year at 0.12; 5 years ago it was 0.45)
Italy 10 Year up +0.00 at 1.52 (began the year at 1.41; 5 years ago it was 1.28)
Japan 10 Year down -0.01 at 0.00 (began the year at -0.02; 5 years ago it was 0.38)
Barclays EM Basket down -0.02 at 4.43 (began the year at 4.27; 5 years ago it was 4.96)
 
Selected Currencies
$ weakened -0.0061 versus € (-0.56%) at 1.1032 ($: YTD: 1.75%; 5YR: -2.3%)
€ strengthened +0.0071 versus £ (-0.63%) at 1.1230 (€: YTD: 5.19%; 5YR: 22.5%)
$ strengthened +0.0009 versus £ (+0.07%) at 1.2389 ($: YTD: 6.59%; 5YR: 16.5%)
¥ strengthened +0.2400 versus $ (+0.22%) at 107.5400 (¥: YTD: -0.97%; 5YR: 11.1%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.14 (-0.65%) at 21.33 (YTD: -67.89%; 5YR: -61.8%)
WTI Crude ($/bbl) up +0.39 (+1.94%) at 20.48 (YTD: -66.46%; 5YR: -57.0%)
Gold ($/ozt) down -12.07 (-0.76%) at 1585.83 (YTD: 4.14%; 5YR: 31.4%)
Copper ($/mt) up +181.50 (+3.81%) at 4951.00 (YTD: -19.81%; 5YR: -18.0%)

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros