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6th February 2020

06/02/2020

Market Data and Morning Chat

Morning Chat 

The healing continues: Another healthy day for equity markets, another slip down for bond prices as the yields inch up and with UK gilts moving more than most government issues.  Asian equities kicked off with China, Hong Kong and Japan all gaining. Europe followed suit with ½ to 1½% gains and the US joined in with 1%. Yet it seems more a rebound than a recovery at this stage.  On one hand, the global count of coronavirus cases passed 24,000 and the pace hasn’t broken yet, but on the other, there are hopes for a treatment based on Gilead’s drug.

Yet it’s not all clear on the health check: While headline news, Wuhan’s coronavirus hasn’t been as deadly as this year’s flu season. The US alone has seen nearly 10 million cases, 87,000 hospitalisations and at least 12,000 deaths. The coronavirus is however more lethal and less predictable (flu “season” diminishes as the weather improves), so has led to a greater economic disruption. Non-Chinese nationals are displaced, shipping nearly shut down and domestic demand paused.  Apple and Starbucks have shuttered shops, Yum Brands fears profits slide, Tesla shares tumbled 17.2% over delivery delays, and Chinese GDP estimates have been trimmed.

Trump’s having a good week: Nancy Pelosi’s probably feeling grumpy, Iowa’s Democratic primary was a PR disaster, fellow center-left Democrats Biden and Klobuchar were 4th and 5th in the Caucus, and Trump was gloating. No wonder. His approval rating’s risen to 43.4% – a level only seen once since day 57 of his Presidency – and Gallup & Rasmussen polls had him on 49% and 48% respectively. Tariff war headlines have substantially diminished, Iran tensions aren’t front-page news, ADP employment nearly doubled forecasts to the highest level in 4 years and he’s been acquitted in his impeachment trial. Good times for Trump.

Market futures & the oil price heading higher today on China’s plans to cut tariffs on US goods
Imperial (-6.7%) profits turn to vapour after sales in smoking alternatives facing partial US ban
GlaxoSmithKline (-4.2%) finds new drugs less a shot-in-the-arm as development costs rise
Qualcomm (+2.2%), though up overall, slipped after saying sales not as geed along by 5G sales
Biogen (+17.5%) on uppers after beating Mylan on patent challenge to MS drug Tecfidera
Concho (+7.3%) rebounds much more than might be expected on oil price and analyst upgrade
Take-two (-4.9%) loses a life in the management game as key designer Dan Houser leaves
Ford (-9.5%) sees costs accelerate on development projects and the brakes put on sales 
Coty (+14.5%) put a good face on sales declining less than expected with results lifting peers 

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +12.97 (+0.93%) at 1,406 (YTD: 2.27%; 5YR: 58.7%)
MSCI AC World Equities (USD) up +91.92 (+0.91%) at 10,186 (YTD: 2.08%; 5YR: 58.4%)
Barclays Global Aggregate Bonds down -1.76 (-0.34%) at 514 (YTD: 0.40%; 5YR: 13.4%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +37.10 (+1.13%) at 3,335 (YTD: 3.22%; 5YR: 62.2%)    
NASDAQ up +40.71 (+0.43%) at 9,509 (YTD: 5.97%; 5YR: 100.4%)    
Euro STOXX 50 up +45.56 (+1.22%) at 3,778 (YTD: 0.87%; 5YR: 11.2%)    
FTSE 100 up +42.66 (+0.57%) at 7,482 (YTD: -0.79%; 5YR: 9.2%)    
CAC up +50.35 (+0.85%) at 5,985 (YTD: 0.12%; 5YR: 27.6%)    
DAX up +196.59 (+1.48%) at 13,478 (YTD: 1.73%; 5YR: 24.3%)    
Nikkei 225  up +554.03 (+2.38%) at 23,874 (YTD: 0.92%; 5YR: 35.3%)    
Hang Seng up +654.25 (+2.44%) at 27,441 (YTD: -2.66%; 5YR: 11.2%)    
MSCI Emerging Markets up +4.01 (+0.37%) at 1,089 (YTD: -2.27%; 5YR: 11.3%)    
    
Selected Government Bond Yields    
US 2 Year up +0.01 at 1.45 (began the year at 1.57; 5 years ago it was 0.64)    
US 10 Year up +0.01 at 1.66 (began the year at 1.92; 5 years ago it was 1.96)    
UK 10 Year up +0.05 at 0.62 (began the year at 0.82; 5 years ago it was 1.65)    
Germany 10 Year up +0.01 at -0.36 (began the year at -0.19; 5 years ago it was 0.37)    
France 10 Year up +0.01 at -0.10 (began the year at 0.12; 5 years ago it was 0.61)    
Italy 10 Year up +0.01 at 0.97 (began the year at 1.41; 5 years ago it was 1.58)    
Japan 10 Year up +0.02 at -0.02 (began the year at -0.02; 5 years ago it was 0.33)    
Barclays EM Basket up +0.00 at 4.02 (began the year at 4.27; 5 years ago it was 5.00)
    
Selected Currencies    
$ unchanged 0.0000 versus € (0.00%) at 1.1001 ($: YTD: 2.03%; 5YR: 2.8%)    
€ strengthened +0.0011 versus £ (-0.09%) at 1.1810 (€: YTD: 0.03%; 5YR: 14.0%)    
$ strengthened +0.0011 versus £ (+0.08%) at 1.2993 ($: YTD: 2.04%; 5YR: 14.7%)    
¥ weakened -0.1200 versus $ (-0.11%) at 109.8800 (¥: YTD: 1.18%; 5YR: 8.5%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.60 (+1.09%) at 55.62 (YTD: -16.26%; 5YR: -3.3%)    
WTI Crude ($/bbl) up +1.14 (+2.30%) at 50.75 (YTD: -16.89%; 5YR: 0.5%)    
Gold ($/ozt) up +0.17 (+0.01%) at 1558.02 (YTD: 2.31%; 5YR: 26.4%)    
Copper ($/mt) up +104.00 (+1.85%) at 5722.00 (YTD: -7.32%; 5YR: 0.0%)    
    
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