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31st January 2020

31/01/2020

Market Data and Morning Chat

Morning Chat

We gotta get out of this place: The votes have passed, the bills are signed, at 11pm tonight the UK officially leaves the EU. Brexit is done – so far. We now enter the transition phase under the structure of the Withdrawal Agreement. As it presently stands, the UK will remain in transition until the year-end during which time there will be negotiations to develop a trade agreement.  Extension? For now unplanned. For now, there’s likely to be little news, only conjecture and posturing, which may affect the pound (now at $1.3125 or €1.1904) and be a driver of index volatility.

Don’t bring me down: Wait, $1.3125 or €1.1904? The pound really rallied? Yet, prior to yesterday’s Bank of England Monetary Policy Committee meeting, money markets odds of a cut in UK rates were around 52% with the pound at $1.3012 & €1.1817.  Given the heads or tails odds of a cut, currency traders expected a close call, but the Committee voted 7 to 2 to keep rates on hold at 0.75%. Moreover, the tone of the minutes reflected their more optimistic outlook and forecast a pick-up in 2020, noting if forecasts are met, potentially “modest tightening … may be needed”

This side of goodbye: We closed yesterday with the European equity markets down ¾ to 1¾%. Although the Euro-zone Industrial Sentiment data was significantly better-than-expected over more optimistic production expectations, Services Sentiment unexpectedly slipped on a deteriorating past-demand assessment. Since those factors somewhat cancelled out, the focus remained on the increase in coronavirus cases as it passed those of SARS (sadly unsurprising given the Wuhan virus’ higher R0 contagion rating).  The States, though, rallied ¼% on the release of the Q4 GDP data, which came in in-line at 2.1% for the quarter or 2.3% for the year. Now for Friday.

Market futures point to a positive day to close out the UK’s EU membership, but the US is down
The last billion’s the easiest; Jeff Bezos’ net worth rose by over $11billion… yesterday alone…
… as Amazon (+9.7% afterhours) booked a 21% quarterly increase in revenues
The four $1trillion firms – Apple, Amazon, Microsoft & Alphabet – make up 17.8% of the S&P
Wow… busy day
Diageo (-2.6%) shares a bit woozy as the company lowers guidance over travel restrictions
Unilever (+2.0%) considering breaking from tea after recording its slowest growth in a decade
Carnival Cruises (-3.8%) were docked as one ship was quarantined in Italy over the virus
Amgen (-2.4% afterhours), despite beating on earnings, didn’t inject the expected revenues 
Visa (-1.3% total) pinned enough earnings down, but also didn’t chip in the expected revenues
Western Digital (+4.7%) flashed a robust set of earnings and revenues at the market
Facebook (-6.1%) was anti-social, posting a 51% rise in costs and only 24.7% revenue gain 
Coca-Cola (+3.3%) fizzed up on 7% global organic revenue growth as the brand strength grew
Hershey’s (+4.6%) delivered a sweet 6.3% jump in international revenues and earnings beat.
UPS (-6.7%) packaged up revenues that fell short of expectations and weak guidance
CEO’s must hate when shares rally because they’re leaving, such as IBM’s 4.7% gain

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -5.00 (-0.36%) at 1,385 (YTD: 0.70%; 5YR: 60.0%)
MSCI AC World Equities (USD) down -5.10 (-0.05%) at 10,046 (YTD: 0.67%; 5YR: 60.3%)
Barclays Global Aggregate Bonds up +1.38 (+0.27%) at 517 (YTD: 0.98%; 5YR: 13.4%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +10.26 (+0.31%) at 3,284 (YTD: 1.64%; 5YR: 64.6%)    
NASDAQ up +23.77 (+0.26%) at 9,299 (YTD: 3.64%; 5YR: 100.6%)    
Euro STOXX 50 down -45.58 (-1.22%) at 3,691 (YTD: -1.45%; 5YR: 10.1%)    
FTSE 100 down -101.61 (-1.36%) at 7,382 (YTD: -2.13%; 5YR: 9.4%)    
CAC down -83.12 (-1.40%) at 5,872 (YTD: -1.78%; 5YR: 27.5%)    
DAX down -187.88 (-1.41%) at 13,157 (YTD: -0.69%; 5YR: 23.0%)    
Nikkei 225  up +227.43 (+0.99%) at 23,205 (YTD: -1.91%; 5YR: 31.3%)    
Hang Seng down -60.48 (-0.23%) at 26,389 (YTD: -6.39%; 5YR: 7.7%)    
MSCI Emerging Markets down -24.73 (-2.25%) at 1,073 (YTD: -3.76%; 5YR: 11.6%)    
    
Selected Government Bond Yields    
US 2 Year down 0.00 at 1.41 (began the year at 1.57; 5 years ago it was 0.45)    
US 10 Year down -0.01 at 1.58 (began the year at 1.92; 5 years ago it was 1.64)    
UK 10 Year up +0.03 at 0.54 (began the year at 0.82; 5 years ago it was 1.33)    
Germany 10 Year up +0.00 at -0.40 (began the year at -0.19; 5 years ago it was 0.30)    
France 10 Year up +0.00 at -0.15 (began the year at 0.12; 5 years ago it was 0.54)    
Italy 10 Year down 0.00 at 0.94 (began the year at 1.41; 5 years ago it was 1.59)    
Japan 10 Year down 0.00 at -0.07 (began the year at -0.02; 5 years ago it was 0.27)    
Barclays EM Basket down -0.02 at 4.05 (began the year at 4.27; 5 years ago it was 4.88)
    
Selected Currencies    
$ strengthened +0.0013 versus € (+0.12%) at 1.1025 ($: YTD: 1.82%; 5YR: 2.3%)    
€ weakened -0.0040 versus £ (+0.34%) at 1.1904 (€: YTD: -0.76%; 5YR: 11.8%)    
$ weakened -0.0030 versus £ (-0.23%) at 1.3125 ($: YTD: 1.04%; 5YR: 12.6%)    
¥ weakened -0.4500 versus $ (-0.41%) at 109.0600 (¥: YTD: 0.44%; 5YR: 7.7%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.14 (-0.24%) at 57.83 (YTD: -12.93%; 5YR: 13.9%)    
WTI Crude ($/bbl) down -1.19 (-2.23%) at 52.14 (YTD: -14.61%; 5YR: 8.1%)    
Gold ($/ozt) down -9.73 (-0.61%) at 1575.16 (YTD: 3.44%; 5YR: 23.5%)    
Copper ($/mt) down -53.50 (-0.95%) at 5587.50 (YTD: -9.50%; 5YR: 1.7%)    

 

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros