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4th June 2020

04/06/2020

Market Data and Morning Chat

Morning Chat

I’ve been losing you: Covid-19’s scary headline impact has been the unemployment surge.  Tomorrow sees the non-farm payrolls data – the key US employment data release – but the ADP data set was released yesterday and it’s worth a look due to its very high correlation to the non-farm numbers over 18 years (the last two data points swamp the data making the correlation even higher). The ADP job losses were forecast to be 9million after last month’s 20.2million. It was only 2.76million for May and April’s number was revised lower! Big numbers, but better numbers boosting investor morale and equity markets.

The swing of things: Better employment news, oh, a-ha, and better services PMI data around the globe, prompted even bonds to swing a bit more optimistically, with US 10-year yields up 0.07% and 0.05% in the UK. However there’s also a swing in focus back to non-Covid issues. From a pick-up in column inches devoted to the current Brexit negotiations impasse (fishing rights and ECJ oversight) to an increase in friction between China and the UK over Hong Kong and a Huawei-rethink. But if we can focus on other problems, maybe the big one isn’t as bad as it was.

Maybe, maybe: Take Germany for example.  German equities have seen a solid recovery – they could even hit positive-for-the-year today (in sterling terms) with only a ¼% rally and there’s the good news to do it.  April’s Markit PMIs were better-than-forecast. Yesterday’s unemployment rate data beat expectations at 6.3% and the harmonised EU rate held steady on last month’s 3.5% pace with total employment flat at 42.73million! Moreover, Chancellor Angela Merkel’s coalition just agreed £117billion in further stimulus– a third more than expected – to boost spending through a surprise temporary 3% VAT cut, increased infrastructure investment and small company bridge financing.

 Unsurprisingly, after yesterday’s gains, today’s equity futures are taking a pause for breath
…Although the German stock market futures are pointing to a tantalisingly close 0.16% gain
 
… and by yesterday’s close the NASDAQ 100 index was only 0.3% off a new all-time high!
 
Just shows statistical definitions really matter - French daily new cases fell nearly 40,000…
 
… after new cases redefined from positive tests to patients testing positive for Covid-19

Italian bond auction's near £86billion bids for £12.5billion in issue – a record over-subscription
US crude inventories nudge slightly lower, remaining just below 2017 all-time peak

General Mattis once said “Be polite, be professional, but have a plan to kill everybody you meet” 
… and the former Defense Secretary just fired a broadside at President Trump in The Atlantic

 

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +20.70 (+1.60%) at 1,312 (YTD: -4.61%; 5YR: 41.3%)
MSCI AC World Equities (USD) up +152.84 (+1.63%) at 9,506 (YTD: -4.74%; 5YR: 41.7%)
Barclays Global Aggregate Bonds down -0.62 (-0.12%) at 523 (YTD: 2.12%; 5YR: 18.0%)
 
Selected Equity Indices (Capital returns)
S&P 500 up +42.05 (+1.36%) at 3,123 (YTD: -3.34%; 5YR: 49.0%)
NASDAQ up +74.54 (+0.78%) at 9,683 (YTD: 7.92%; 5YR: 91.4%)
Euro STOXX 50 up +110.57 (+3.50%) at 3,270 (YTD: -12.70%; 5YR: -8.1%)
FTSE 100 up +162.27 (+2.61%) at 6,382 (YTD: -15.38%; 5YR: -7.0%)
CAC up +163.41 (+3.36%) at 5,022 (YTD: -15.99%; 5YR: 0.7%)
DAX up +466.08 (+3.88%) at 12,487 (YTD: -5.75%; 5YR: 10.1%)
Nikkei 225  up +100.82 (+0.45%) at 22,715 (YTD: -3.98%; 5YR: 10.9%)
Hang Seng up +16.18 (+0.07%) at 24,342 (YTD: -13.65%; 5YR: -11.7%)
MSCI Emerging Markets up +20.53 (+2.12%) at 988 (YTD: -11.36%; 5YR: 0.0%)
 
Selected Government Bond Yields
US 2 Year down 0.00 at 0.19 (began the year at 1.57; 5 years ago it was 0.66)
US 10 Year down 0.00 at 0.74 (began the year at 1.92; 5 years ago it was 2.31)
UK 10 Year up +0.05 at 0.27 (began the year at 0.82; 5 years ago it was 2.03)
Germany 10 Year up +0.00 at -0.36 (began the year at -0.19; 5 years ago it was 0.84)
France 10 Year down 0.00 at 0.00 (began the year at 0.12; 5 years ago it was 1.14)
Italy 10 Year down 0.00 at 1.55 (began the year at 1.41; 5 years ago it was 2.14)
Japan 10 Year up +0.02 at 0.03 (began the year at -0.02; 5 years ago it was 0.50)
Barclays EM Basket up +0.01 at 3.98 (began the year at 4.27; 5 years ago it was 5.35)
 
Selected Currencies
$ strengthened +0.0017 versus € (+0.15%) at 1.1220 ($: YTD: 0.08%; 5YR: 0.6%)
€ strengthened +0.0025 versus £ (-0.22%) at 1.1182 (€: YTD: 5.64%; 5YR: 21.9%)
$ strengthened +0.0046 versus £ (+0.37%) at 1.2546 ($: YTD: 5.41%; 5YR: 18.4%)
¥ weakened -0.1600 versus $ (-0.15%) at 109.0700 (¥: YTD: 0.45%; 5YR: 14.2%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.27 (-0.71%) at 37.99 (YTD: -42.80%; 5YR: -37.8%)
WTI Crude ($/bbl) up +0.48 (+1.30%) at 37.29 (YTD: -38.93%; 5YR: -37.5%)
Gold ($/ozt) up +4.55 (+0.27%) at 1703.42 (YTD: 11.86%; 5YR: 44.8%)
Copper ($/mt) down -4.00 (-0.07%) at 5524.50 (YTD: -10.52%; 5YR: -8.1%)

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros