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7th February 2020

07/02/2020

Market Data and Morning Chat

Morning Chat

Once is not enough: Hopefully we close out today with another equity rally, giving markets a solid five-day winning streak after yesterday’s broad gains. With all the geo-political and coronavirus news swirling around, that may seem quite a surprise. Add US equities are back to all-time highs and it appears even more startling – or maybe not. Consider the risks that have softened. There have been cuts in Chinese tariffs against the US. The impeachment trial closed. The Markit manufacturing PMI scores improved almost across the board and earnings results have been robust.  So what will cast a giant shadow next?

Detective story: So, productivity gains elusive this economic recovery, why? Certainly the UK has seen only limited gains. In the US, non-farm labour productivity rebounded in Q4 to +1.4% from -0.2% in Q3, but they still underwhelm especially considering expectations called for a gain of 1.6% – hardly a heady pace. 2019 saw productivity average 1.7%, the strongest pace this decade, but well below the 2.1% clip since 1947. Reasons abound, but perhaps the most compelling is the slower capital expenditure as low wage gains favour labour use. Thus, any acceleration in today’s wage data may foreshadow a possible productivity driver.

The arrangement: Geo-politics also rattles. For example, the German political establishment’s convulsions over the CDU’s – Merkel’s party – agreement with the AfD to elect the FDP’s Thomas Kemmerich as leader of the Thuringia State legislature. Kemmerich’s resigned and the election looks set for a do-over so the CDU isn’t seen dealing with the “far-right” AfD.  Then, there’s the too-close-to-call US election. In Washington, the town without pity, Donald Trump and Nancy “shredder” Pelosi; the former celebrating impeachment acquittal and polling gains (now with the second highest approval after Reagan among Republicans) the latter indignant at Trump’s win and Biden’s Iowa loss.

Futures are selling off today. The hook? A pause after the rally and anticipation of payrolls data.
Ireland goes to the polls tomorrow with polls-leader “populist” Sinn Féin hoping to be champion.
French and German industrial production were in harm’s way falling 2.8% and 3.5% last month
Trump’s tweets appear to have an effect as Twitter (+14.7%) subscriber numbers jump over 20%
Philip Morris (+2.7%) heated product sales were ironically smoking hot, jumping by 41%
Kellog’s (-8.4%) shares were crunched – guidance didn’t snap, crackle, pop as analysts hoped
Boeing (+3.4%) shares jetted up on possible FAA timetable agreement on 737Max fix

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +9.00 (+0.64%) at 1,415 (YTD: 2.92%; 5YR: 59.7%)
MSCI AC World Equities (USD) up +50.63 (+0.50%) at 10,237 (YTD: 2.59%; 5YR: 59.2%)
Barclays Global Aggregate Bonds down -0.32 (-0.06%) at 513 (YTD: 0.34%; 5YR: 13.3%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +11.09 (+0.33%) at 3,346 (YTD: 3.56%; 5YR: 62.8%)    
NASDAQ up +63.47 (+0.67%) at 9,572 (YTD: 6.68%; 5YR: 101.8%)    
Euro STOXX 50 up +27.68 (+0.73%) at 3,806 (YTD: 1.61%; 5YR: 12.0%)    
FTSE 100 up +22.31 (+0.30%) at 7,505 (YTD: -0.50%; 5YR: 9.5%)    
CAC up +52.78 (+0.88%) at 6,038 (YTD: 1.01%; 5YR: 28.7%)    
DAX up +96.49 (+0.72%) at 13,575 (YTD: 2.46%; 5YR: 25.2%)    
Nikkei 225  down -45.61 (-0.19%) at 23,828 (YTD: 0.72%; 5YR: 35.0%)    
Hang Seng down -138.48 (-0.50%) at 27,355 (YTD: -2.96%; 5YR: 10.8%)    
MSCI Emerging Markets up +12.99 (+1.19%) at 1,102 (YTD: -1.10%; 5YR: 12.7%)    
    
Selected Government Bond Yields    
US 2 Year down -0.02 at 1.42 (began the year at 1.57; 5 years ago it was 0.64)    
US 10 Year down -0.03 at 1.61 (began the year at 1.92; 5 years ago it was 1.96)    
UK 10 Year down -0.03 at 0.58 (began the year at 0.82; 5 years ago it was 1.65)    
Germany 10 Year down -0.01 at -0.38 (began the year at -0.19; 5 years ago it was 0.37)
France 10 Year down -0.01 at -0.13 (began the year at 0.12; 5 years ago it was 0.61)    
Italy 10 Year down -0.01 at 0.95 (began the year at 1.41; 5 years ago it was 1.58)    
Japan 10 Year down -0.02 at -0.04 (began the year at -0.02; 5 years ago it was 0.33)    
Barclays EM Basket down -0.01 at 4.01 (began the year at 4.27; 5 years ago it was 5.00)
    
Selected Currencies    
$ strengthened +0.0003 versus € (+0.03%) at 1.0972 ($: YTD: 2.29%; 5YR: 3.1%)    
€ weakened -0.0007 versus £ (+0.06%) at 1.1791 (€: YTD: 0.19%; 5YR: 14.2%)    
$ weakened -0.0005 versus £ (-0.04%) at 1.2939 ($: YTD: 2.44%; 5YR: 15.1%)    
¥ strengthened +0.0500 versus $ (+0.05%) at 109.9200 (¥: YTD: 1.22%; 5YR: 8.4%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.14 (-0.26%) at 54.34 (YTD: -18.19%; 5YR: -5.5%)    
WTI Crude ($/bbl) up +0.20 (+0.39%) at 50.95 (YTD: -16.56%; 5YR: -1.4%)    
Gold ($/ozt) up +0.89 (+0.06%) at 1566.23 (YTD: 2.85%; 5YR: 27.1%)    
Copper ($/mt) up +13.00 (+0.23%) at 5735.00 (YTD: -7.11%; 5YR: 1.5%)    

 

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros