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21st July 2020

21/07/2020

Market Data and Morning Chat

Morning Chat

Now it's found a break to make at last: There’s nothing magical about 3238.28, yet it’s been a roadblock to US equities. February 25th, the day after a spike in news items on Covid-19 in Italy, the S&P500 opened 0.02% above the level. For 45 minutes the market remained higher then fell. Despite three tries, the US has not traded higher since… until yesterday.  Solid results for the Oxford & BioNTech / Pfizer vaccines coupled with an imminent unveiling of an extension (and possible modification) of the near-expiry covid-19 fiscal support plan lifted US equities over ¾% and year-to-date positive.
 
They’ve got to find a way …and they did. EU leaders finally found the path very early this morning to a major fiscal support plan. No news if its signed yet, but the fruits of their 5-day marathon (thought the second longest meeting in EU history) is a €750billion package consisting of €390billion in grants (not the €500billion originally suggested) and €360billion in loans alongside the also-debated €1,074billion budget. EU leaders had a Rutte awakening as the Netherlands Prime Minister and other Frugals were steadfast in resisting pressure, thereby also winning substantial budget rebates and changes to customs duty collection.  
 
Say what they need to say: It’s amazing the impact of analysts. One raised the Amazon target price to a high-end $3,800 estimate (it opened at $3,000 so a 27% premium) over online shopping trends sending the shares off to the races. By the close, Amazon was up 7.9% and Jeff Bezos was $13billion richer. Concomitantly, other key IT players – Microsoft (+4.3%), Google (+3.1%), Apple (+2.1%) & Netflix (+1.9%) all benefitted from the optimism. Chuck in solid quarterly results for IBM (+5.9%) – their revenues were boosted by Cloud demand – and you can see how the 2.5% Nasdaq rally was driven.
 
 
The EU deal, understandably, flicked a switch to optimism and equity futures are up ½ to 1½%
 …One possible hiccup – the Belgian Socialists warn of a new election if no coalition is formed
 UK's Covid-inflated budget deficit shrunk in June (but not as much as hoped) to £34.8billion …
 … pushing the government debt-to-GDP level to 99.6% – the highest since March 1961 
 The Irish Q1 GDP was confirmed at +1.2%  – you know, if it grows in Q3 they avoid a recession
 UBS (-0.8% yesterday) generated $7.4billion in operating income versus $7.5billion last year...
 … and signalled possibly lower future credit provisions and return of buybacks and dividend 
 Citrix (+7.6%) jumped after a couple of analysts raised their forecasts over remote-work boost
 … as network solutions provider ServiceNow (+6.8%) was similarly boosted by upgrades
 Halliburton’s (2.9%) was even higher before earnings let-down & $2.1billion impairment charge
 China’s online payments platform Ant plans circa $200billion IPO lifting Alibaba by 6.1%

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +10.42 (+0.77%) at 1,370 (YTD: -0.39%; 5YR: 46.8%)
MSCI AC World Equities (USD) up +81.97 (+0.83%) at 9,917 (YTD: -0.62%; 5YR: 47.3%)
Barclays Global Aggregate Bonds up +1.17 (+0.22%) at 534 (YTD: 4.33%; 5YR: 21.4%)
 
Selected Equity Indices (Capital returns)
S&P 500 up +27.11 (+0.84%) at 3,252 (YTD: 0.65%; 5YR: 53.4%)
NASDAQ up +263.90 (+2.51%) at 10,767 (YTD: 20.00%; 5YR: 106.7%)
Euro STOXX 50 up +22.74 (+0.68%) at 3,388 (YTD: -9.53%; 5YR: -7.1%)
FTSE 100 down -28.78 (-0.46%) at 6,262 (YTD: -16.98%; 5YR: -7.5%)
CAC up +23.76 (+0.47%) at 5,093 (YTD: -14.80%; 5YR: -0.3%)
DAX up +127.31 (+0.99%) at 13,047 (YTD: -1.53%; 5YR: 12.4%)
Nikkei 225  up +166.74 (+0.73%) at 22,884 (YTD: -3.27%; 5YR: 9.8%)
Hang Seng up +442.60 (+1.77%) at 25,501 (YTD: -9.54%; 5YR: -0.1%)
MSCI Emerging Markets up +9.44 (+0.89%) at 1,065 (YTD: -4.50%; 5YR: 13.3%)
 
Selected Government Bond Yields
US 2 Year down 0.00 at 0.15 (began the year at 1.57; 5 years ago it was 0.68)
US 10 Year up +0.00 at 0.61 (began the year at 1.92; 5 years ago it was 2.33)
UK 10 Year down -0.01 at 0.15 (began the year at 0.82; 5 years ago it was 2.09)
Germany 10 Year up +0.01 at -0.45 (began the year at -0.19; 5 years ago it was 0.78)
France 10 Year up +0.01 at -0.16 (began the year at 0.12; 5 years ago it was 1.08)
Italy 10 Year down -0.04 at 1.06 (began the year at 1.41; 5 years ago it was 1.96)
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 down -0.01 at 3.70 (began the year at 4.27; 5 years ago it was 5.33)
 
Selected Currencies
$ weakened -0.0001 versus € (-0.01%) at 1.1440 ($: YTD: -1.88%; 5YR: -4.4%)
€ weakened -0.0029 versus £ (+0.26%) at 1.1089 (€: YTD: 6.53%; 5YR: 28.1%)
$ weakened -0.0036 versus £ (-0.28%) at 1.2687 ($: YTD: 4.34%; 5YR: 18.5%)
¥ weakened -0.0600 versus $ (-0.06%) at 107.3300 (¥: YTD: -1.16%; 5YR: 15.3%)
 
Selected Commodities
Brent Crude ($/bbl) up +0.28 (+0.65%) at 43.16 (YTD: -35.02%; 5YR: -23.1%)
WTI Crude ($/bbl) up +0.22 (+0.54%) at 40.81 (YTD: -33.16%; 5YR: -18.6%)
Gold ($/ozt) up +4.20 (+0.23%) at 1820.35 (YTD: 19.54%; 5YR: 64.4%)
Copper ($/mt) up +39.50 (+0.61%) at 6487.50 (YTD: 5.08%; 5YR: 18.4%)
 
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