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2nd April 2020

02/04/2020

Market Data and Morning Chat

Morning Chat

If only Trump was April Fooling: US President Trump spoke seriously rather than dismissively, warning of a “painful” few weeks over the Covid-19 outbreak and highlighting concerns over the oil price situation – more of which below – rattled the markets and energy stocks (US energy stocks slipped 4.6%). Sentiment was also jarred by some European banks suspending dividends, prompting concerns American banks and high-yield plays may do the same.  Therefore April kicked off on a sour, but not dire, note; equities only give back some of last week’s gain, volatility didn’t spike much and bond yields & gold were fairly unchanged.
 
Greta won’t be pleased: The Energy Information Administration reported crude inventories increased 13.8million barrels over the week to March 27, near-enough 10% of US weekly consumption.  Although inventories normally rise this time of year, it was a bigger-than-normal build. When inventories jumped like this weekly for a few weeks in 2014, oil prices fell 60%. Certainly markets anticipated some inventory build-up – prices are down 65% – but the Covid-19 shutdown makes for uncertain calculations. So oil prices are going lower again – to negative in some instances, making fossil fuels cheaper than free sunlight and prompting China to cut alternative energy funding.
 
Cleaner numbers when the dust settled: Yesterday also saw a reasonable slate of economic and sentiment data points and, although masked by bigger headlines, they were decent.  Italy had regional lockdowns from the last week in February, yet their February unemployment situation improved to 9.7% from January’s 9.8% when it was expected at 10.0%. The final European Markit manufacturing PMIs were much as the flash numbers indicated, though with notable improvements to the Spanish and British numbers, a slight improvement in France and slightly down in Germany and Italy.  Meanwhile, the US ADP employment was significantly better-than-expected, down only 27,000.
 
No fooling, after yesterday’s weak start to April, Asia’s trading up and so too equity futures
According to the London School of Hygiene and Tropical Medicine the lockdown is helping
… with human interactions down 70% and the Covid-19 infection rate (R0) down from 2.6 to 0.6
Oil prices recovered slightly today as China announced it will increase state purchases
Apple strikes deal to allowing users to stream Amazon Prime shows on Apple devices
Yesterday’s big movers in the UK were led by Ocado (+9.0%) and the grocers, along with…
… the Tobacco companies BATs (+3.5%) & Imperial (+2.2) as their dividend appears secure
…while Target (+2.5%), Regeneron (+1.7%) and solid dividend defence names lead in US

 

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -40.34 (-3.66%) at 1,062 (YTD: -22.79%; 5YR: 16.0%)
MSCI AC World Equities (USD) down -304.04 (-3.85%) at 7,586 (YTD: -23.98%; 5YR: 15.4%)
Barclays Global Aggregate Bonds up +0.54 (+0.11%) at 511 (YTD: -0.22%; 5YR: 13.4%)
 
Selected Equity Indices (Capital returns)
S&P 500 down -114.09 (-4.41%) at 2,471 (YTD: -23.53%; 5YR: 19.5%)
NASDAQ down -339.52 (-4.41%) at 7,361 (YTD: -17.97%; 5YR: 50.6%)
Euro STOXX 50 down -106.60 (-3.83%) at 2,680 (YTD: -28.43%; 5YR: -27.9%)
FTSE 100 down -217.39 (-3.83%) at 5,455 (YTD: -27.68%; 5YR: -20.2%)
CAC down -188.88 (-4.30%) at 4,207 (YTD: -29.62%; 5YR: -17.1%)
DAX down -391.09 (-3.94%) at 9,545 (YTD: -27.96%; 5YR: -20.2%)
Nikkei 225  down -297.35 (-1.65%) at 17,768 (YTD: -24.89%; 5YR: -8.0%)
Hang Seng down -81.05 (-0.35%) at 23,005 (YTD: -18.39%; 5YR: -9.0%)
MSCI Emerging Markets down -21.32 (-2.51%) at 827 (YTD: -25.78%; 5YR: -16.7%)

Selected Government Bond Yields
US 2 Year down 0.00 at 0.20 (began the year at 1.57; 5 years ago it was 0.54)
US 10 Year down 0.00 at 0.58 (began the year at 1.92; 5 years ago it was 1.91)
UK 10 Year down -0.04 at 0.31 (began the year at 0.82; 5 years ago it was 1.59)
Germany 10 Year up +0.00 at -0.46 (began the year at -0.19; 5 years ago it was 0.19)
France 10 Year up +0.00 at 0.00 (began the year at 0.12; 5 years ago it was 0.48)
Italy 10 Year up +0.00 at 1.51 (began the year at 1.41; 5 years ago it was 1.30)
Japan 10 Year down -0.02 at -0.02 (began the year at -0.02; 5 years ago it was 0.34)
Barclays EM Basket down -0.04 at 4.39 (began the year at 4.27; 5 years ago it was 4.95)
 
Selected Currencies
$ weakened -0.0021 versus € (-0.19%) at 1.0946 ($: YTD: 2.52%; 5YR: -0.6%)
€ strengthened +0.0013 versus £ (-0.11%) at 1.1331 (€: YTD: 4.25%; 5YR: 20.4%)
$ weakened -0.0008 versus £ (-0.06%) at 1.2403 ($: YTD: 6.48%; 5YR: 16.4%)
¥ weakened -0.2200 versus $ (-0.21%) at 107.3000 (¥: YTD: -1.19%; 5YR: 11.6%)
 
Selected Commodities

Brent Crude ($/bbl) up +1.02 (+4.99%) at 21.46 (YTD: -67.69%; 5YR: -60.4%)
WTI Crude ($/bbl) down -0.17 (-0.83%) at 20.31 (YTD: -66.74%; 5YR: -59.5%)
Gold ($/ozt) up +3.64 (+0.23%) at 1586.87 (YTD: 4.21%; 5YR: 32.2%)
Copper ($/mt) down -151.00 (-3.05%) at 4800.00 (YTD: -22.25%; 5YR: -20.6%)

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros