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27th February 2020

27/02/2020

Market Data and Morning Chat

Morning Chat 

Still catching a cold: While the European equity markets closed with mixed numbers – indeed, Italy, France, Spain and Switzerland saw market gains with Germany and the UK lower – the US market continued to sneeze.  There were early signs of a solid recovery, but by the middle of the session the confidence evaporated and gains turned to losses for a couple of indices. Certainly, based on the choppy numbers the cruise companies were posting (Royal Caribbean -8.1%, Norwegian -7.9% & Carnival -7.5%), it again appeared to be Covid-19 concerns that were driving sentiment, particularly over the increased number of European cases.

Though maybe that’s not all: President Trump’s comments are often taken with a pinch (or more) of salt, so his statement that “quite a bit” of the market decline comes from concerns of a possible Democrat election win might seem fanciful.  However, considering US healthcare stocks are only performing in line with the wider market this week when they usually outperform during medical scares, maybe there’s something to it.  There does appear a broader worry Bernie Saunders could win the Democratic nomination and, given his improved Florida polling, take the White House. Not sure what’s scarier, Trump, Saunders or Covid-19.

Schwarze annulled: There’s no doubt Germany’s economy’s in the doldrums sputtering thanks to its vaunted automotive sector steering a weak course.  There have been wide calls for increased government spending, but the “Schwarze Null” or Black Zero policy ensuring a balanced budget has stood in the way of fiscal stimulus.  The policy’s demise has been mooted for years, but yesterday Germany’s Finance Minister Olaf Scholz finally capitulated, announcing a temporary suspension. Given the entire gamut of German bonds trade at negative interest rates, debt-to-GDP is only 60% and there’s a 1.9% budget surplus, Scholz definitely has significant room to maneuver.

Despite Trump’s efforts at comforting the markets, index futures are again indicating a red day.
… not helped by the likes of Microsoft (+1.3%) & Apple (+1.6%) lowering guidance over Covid-19
Diageo (-0.9%) also forecast lower earnings on Covid-19 expecting £200million less in profits
Similarly Danone (+0.5%) though still announced improved margins and an 8.3% gain in earnings
… Meanwhile, the WHO said Italian test errors may have inflated the true number of cases
Rio Tinto’s (-0.1%) posted a 7% revenue annual gain and ore-inspiring £3.7billion record dividend

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -6.40 (-0.48%) at 1,332 (YTD: -3.18%; 5YR: 45.6%)
MSCI AC World Equities (USD) down -45.52 (-0.47%) at 9,581 (YTD: -3.99%; 5YR: 44.3%)
Barclays Global Aggregate Bonds down -0.81 (-0.16%) at 517 (YTD: 1.00%; 5YR: 14.3%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -11.82 (-0.38%) at 3,116 (YTD: -3.54%; 5YR: 48.1%)    
NASDAQ up +15.16 (+0.17%) at 8,981 (YTD: 0.09%; 5YR: 80.9%)    
Euro STOXX 50 up +5.17 (+0.14%) at 3,578 (YTD: -4.47%; 5YR: -0.6%)    
FTSE 100 up +24.59 (+0.35%) at 7,042 (YTD: -6.63%; 5YR: 1.4%)    
CAC up +4.87 (+0.09%) at 5,685 (YTD: -4.91%; 5YR: 14.8%)    
DAX down -15.61 (-0.12%) at 12,775 (YTD: -3.58%; 5YR: 12.0%)    
Nikkei 225  down -477.96 (-2.13%) at 21,948 (YTD: -7.22%; 5YR: 16.8%)    
Hang Seng up +139.71 (+0.52%) at 26,836 (YTD: -4.80%; 5YR: 8.1%)    
MSCI Emerging Markets down -13.23 (-1.25%) at 1,043 (YTD: -6.40%; 5YR: 5.4%)    
    
Selected Government Bond Yields    
US 2 Year down -0.03 at 1.13 (began the year at 1.57; 5 years ago it was 0.62)    
US 10 Year down -0.02 at 1.31 (began the year at 1.92; 5 years ago it was 1.99)    
UK 10 Year down -0.02 at 0.50 (began the year at 0.82; 5 years ago it was 1.80)    
Germany 10 Year down -0.01 at -0.52 (began the year at -0.19; 5 years ago it was 0.33)
France 10 Year down -0.01 at -0.24 (began the year at 0.12; 5 years ago it was 0.60)    
Italy 10 Year up +0.03 at 1.02 (began the year at 1.41; 5 years ago it was 1.33)    
Japan 10 Year down -0.02 at -0.11 (began the year at -0.02; 5 years ago it was 0.33)    
Barclays EM Basket up +0.01 at 3.90 (began the year at 4.27; 5 years ago it was 5.09)
    
Selected Currencies    
$ weakened -0.0042 versus € (-0.39%) at 1.0921 ($: YTD: 2.74%; 5YR: 2.4%)    
€ strengthened +0.0031 versus £ (-0.26%) at 1.1835 (€: YTD: -0.18%; 5YR: 16.5%)    
$ weakened -0.0016 versus £ (-0.12%) at 1.2923 ($: YTD: 2.56%; 5YR: 16.3%)    
¥ strengthened +0.3100 versus $ (+0.28%) at 110.1400 (¥: YTD: 1.43%; 5YR: 8.7%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.76 (-1.44%) at 51.98 (YTD: -21.74%; 5YR: -15.9%)    
WTI Crude ($/bbl) down -1.03 (-2.07%) at 48.73 (YTD: -20.19%; 5YR: 1.2%)    
Gold ($/ozt) up +6.09 (+0.37%) at 1646.51 (YTD: 8.11%; 5YR: 35.6%)    
Copper ($/mt) down -15.00 (-0.26%) at 5670.00 (YTD: -8.16%; 5YR: -3.7%)    
    
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