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20th July 2020

20/07/2020

Market Data and Morning Chat

Morning Chat

Last week’s focus: Last week was good for global equities – every sector rose as most stock indices generated 2-3% gains save China, Hong Kong and the growth-focussed Nasdaq which all fell. The wider gains – given they were led by the healthcare sector’s 3.6% rise – likely derived from hopes for a more imminent Covid-19 vaccine triggering a speedier economic recovery.  It also explains the industrials (+3.5%) and materials (+3.3%) sector gains. Meanwhile heightened tensions with China over Huawei and US sanctions over Hong Kong explains global tech and consumer discretionary’s underperformance (and US sector declines) and in turn those flagging indices.
 
This week’s focus:
It may actually be hard to focus this week as there’s so much to focus on. Earnings season picks up in Europe & America, shifting from the big banks (which generally did ok) to more of the broader economy. Reporting companies include Microsoft, IBM, Kimberly-Clark, numerous airlines & railways, Biogen & hospital business HCA – oh, and Tesla will also electrify interest on Wednesday. Tuesday we’ll see the UK public sector net borrowing. That might be scary. Then US Housing data Wednesday. Thursday, weekly US initial jobless claims. Friday there’s flash PMI data. Yup, definitely a busy week.
 
Struggling to focus: So, no deal - yet. No, not Brexit, but over the €750billion EU stimulus package. Despite extending Friday’s meeting into Saturday and then Sunday, the “45-minute break” called at 11:25pm proved much longer rolling the meetings into today.  However, there is some indication the Frugal Five – Dutch, Austrians, Swedes, Danes, & Finns – may be less obstructive though not fully on-board. They might accept €390billion in grants rather than the proposed €500billion (what’s another €110billion nowadays?) but only if tied to rule-of-law requirements (not sure Poland & Hungary will agree that). Then there’s just the budget to agree!
  
Up-to-the-minute news has the EU talks resuming mid-afternoon with the Euro holding steady
 … alongside European equity futures running pretty much flat, and US futures down ½%
 … while Chinese shares jumped 2.2% as authorities increased insurers equity investment limits
 Also on the China front, the UK suspended the Hong Kong extradition pact raising tensions
 As for Brexit, the stalled talks are set to resume this week on a “landing zone” idea
 July's UK house prices 3.7% up on last year according to the Rightmove and 2.4% up on March
 The Japanese trade balance improved but much less than hoped at a ¥258.8billion deficit
 Kansas City Southern (+1.2%) revenues lower than last year, but track better than expected
 Regions Financial (-4.4%) posts a ¢25 loss per share putting significant provisions into the till
 But Swiss Julius Baer (+0.6%) saw a record profit as net income jumped 43% on trading income

 

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +4.69 (+0.35%) at 1,359 (YTD: -1.15%; 5YR: 45.2%)
MSCI AC World Equities (USD) up +22.21 (+0.23%) at 9,835 (YTD: -1.44%; 5YR: 45.7%)
Barclays Global Aggregate Bonds down -0.54 (-0.10%) at 533 (YTD: 4.11%; 5YR: 21.4%)
 
Selected Equity Indices (Capital returns)

S&P 500 up +9.16 (+0.28%) at 3,225 (YTD: -0.19%; 5YR: 51.5%)
NASDAQ up +29.36 (+0.28%) at 10,503 (YTD: 17.06%; 5YR: 101.3%)
Euro STOXX 50 up +0.25 (+0.01%) at 3,366 (YTD: -10.13%; 5YR: -8.7%)
FTSE 100 up +39.61 (+0.63%) at 6,290 (YTD: -16.60%; 5YR: -7.3%)
CAC down -15.86 (-0.31%) at 5,069 (YTD: -15.20%; 5YR: -1.4%)
DAX up +44.64 (+0.35%) at 12,920 (YTD: -2.49%; 5YR: 10.1%)
Nikkei 225  up +21.06 (+0.09%) at 22,717 (YTD: -3.97%; 5YR: 10.0%)
Hang Seng up +11.70 (+0.05%) at 25,101 (YTD: -10.96%; 5YR: -1.2%)
MSCI Emerging Markets up +9.03 (+0.86%) at 1,055 (YTD: -5.35%; 5YR: 12.8%)
 
Selected Government Bond Yields

US 2 Year down 0.00 at 0.14 (began the year at 1.57; 5 years ago it was 0.71)
US 10 Year down 0.00 at 0.62 (began the year at 1.92; 5 years ago it was 2.37)
UK 10 Year up +0.02 at 0.16 (began the year at 0.82; 5 years ago it was 2.06)
Germany 10 Year up +0.02 at -0.43 (began the year at -0.19; 5 years ago it was 0.76)
France 10 Year up +0.01 at -0.13 (began the year at 0.12; 5 years ago it was 1.04)
Italy 10 Year down -0.03 at 1.14 (began the year at 1.41; 5 years ago it was 1.90)
Japan 10 Year up +0.01 at 0.02 (began the year at -0.02; 5 years ago it was 0.42)
Barclays EM Basket down 0.00 at 3.71 (began the year at 4.27; 5 years ago it was 5.32)
 
Selected Currencies

$ weakened -0.0029 versus € (-0.25%) at 1.1464 ($: YTD: -2.09%; 5YR: -5.7%)
€ strengthened +0.0034 versus £ (-0.31%) at 1.0947 (€: YTD: 7.91%; 5YR: 31.3%)
$ strengthened +0.0008 versus £ (+0.06%) at 1.2549 ($: YTD: 5.38%; 5YR: 19.5%)
¥ weakened -0.2100 versus $ (-0.20%) at 107.2400 (¥: YTD: -1.25%; 5YR: 15.9%)
 
Selected Commodities

Brent Crude ($/bbl) down -0.31 (-0.72%) at 42.81 (YTD: -35.55%; 5YR: -23.1%)
WTI Crude ($/bbl) down -0.16 (-0.39%) at 40.59 (YTD: -33.52%; 5YR: -20.2%)
Gold ($/ozt) up +2.65 (+0.15%) at 1810.52 (YTD: 18.89%; 5YR: 63.4%)
Copper ($/mt) up +11.50 (+0.18%) at 6448.00 (YTD: 4.44%; 5YR: 17.7%)
 
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