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7th September 2020

07/09/2020

Market Data and Morning Chat

One week in: September’s a week old and although down, there’s a subtle change in market reactions.  April, when Covid-19 cases were galloping up, markets stumbled.  However, cases in France, Spain & Greece are at a faster pace now than then and accelerating in the UK & Germany. Yet it’s not the running investors are worrying about, just as markets didn’t yell themselves hoarse over August’s Asian ramp-up either. Instead, bets now appear to be on new riders - the economic data (which has been reasonably okay), the scarring caused by Covid-19 – short-term & long-term – vaccine hopes and markets’ valuations.
 
A weak end?: Thursday’s US decline and broader falls Friday brought the question of valuations home with a thump best exemplified by the Nasdaq.  After September whipped up a +2.4% start, Thursday sell-off was quickly repeated over Friday’s opening hours before rallying to close down only 1.3% (-3.9% month-to-date).  Other major indices faded, but nowhere near as much either day implying punters were thinking about relative valuations.  Plus, the recovery came soon after the non-farm payrolls (which were positively received by Fed chairman Jerome Powell) and the better-than-expected 8.4% unemployment rate highlighting how economic data is again affecting the going.

One week out: So what about this week. Don’t dismiss the Covid-19 pace, although vaccine hopes are now a buffer.  Powell may’ve cheered the positive employment report, but the Fed’s still remaining cautious, so look also to the economics. US inflation might jockey to be a headline number (expect +0.2%), but the job openings or JOLTs report is more likely to live up to its name, as might various industrial production reports while EIA inventories can make oil prices slide either way. Plus, for the UK, one word – Brexit. Still at an impasse and the rhetoric certainly muddies the course.
 
 Market futures are continuing the skew with Europe up alongside the Dow, but Nasdaq down
 Asian markets had started well as Chinese exports were stronger-than-forecast…
 … but a fade in tech stocks led by chip-maker SMIC in later trading has trimmed equity returns
 China’s SMIC (-20.5% in Hong Kong) faltered over reports it could be added to the US blacklist
 German industrial production only grew a tepid 1.2% over July, not the 4.5% hoped for
 AB Foods (-0.4%) should hit the (Pri)mark today as Q4 results exceeded expectations
 PayPal’s (-6.4%) market cap neck-and-neck with that of Bank of America, second largest in US
 … while mobile payments co Square (-4.6%) closes in on Goldman Sachs’ capitalisation
 … thanks to Square’s possibly excessive 288x forward Price/Earnings ratio & Goldman’s 12x
 
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Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -13.78 (-0.97%) at 1,412 (YTD: 2.67%; 5YR: 68.2%)
MSCI AC World Equities (USD) down -112.45 (-1.08%) at 10,314 (YTD: 3.36%; 5YR: 69.8%)
Barclays Global Aggregate Bonds down -2.47 (-0.45%) at 541 (YTD: 5.72%; 5YR: 21.4%)
 
Selected Equity Indices (Capital returns)
S&P 500 down -28.10 (-0.81%) at 3,427 (YTD: 6.07%; 5YR: 78.4%)
NASDAQ down -144.97 (-1.27%) at 11,313 (YTD: 26.09%; 5YR: 141.5%)
Dow Jones Industrial down -159.42 (-0.56%) at 28,133 (YTD: -1.42%; 5YR: 74.7%)
Euro STOXX 50 down -43.63 (-1.32%) at 3,261 (YTD: -12.94%; 5YR: 2.0%)
FTSE 100 down -51.78 (-0.88%) at 5,799 (YTD: -23.11%; 5YR: -4.5%)
CAC down -44.45 (-0.89%) at 4,965 (YTD: -16.95%; 5YR: 9.1%)
DAX down -215.11 (-1.65%) at 12,843 (YTD: -3.07%; 5YR: 27.0%)
Nikkei 225  down -115.48 (-0.50%) at 23,090 (YTD: -2.40%; 5YR: 29.3%)
Hang Seng down -162.50 (-0.66%) at 24,533 (YTD: -12.97%; 5YR: 19.2%)
MSCI Emerging Markets down -9.35 (-0.84%) at 1,100 (YTD: -1.36%; 5YR: 41.3%)
 
Selected Government Bond Yields
US 2 Year unchanged at 0.14 (began the year at 1.57; 5 years ago it was 0.71)
US 10 Year unchanged at 0.72 (began the year at 1.92; 5 years ago it was 2.12)
UK 10 Year up +0.03 at 0.26 (began the year at 0.82; 5 years ago it was 1.81)
Germany 10 Year up +0.02 at -0.45 (began the year at -0.19; 5 years ago it was 0.67)
France 10 Year up +0.03 at -0.15 (began the year at 0.12; 5 years ago it was 1.12)
Italy 10 Year up +0.02 at 1.03 (began the year at 1.41; 5 years ago it was 1.89)
Japan 10 Year up +0.01 at 0.04 (began the year at -0.02; 5 years ago it was 0.37)
Barclays EM Basket up +0.00 at 3.77 (began the year at 4.27; 5 years ago it was 5.45)
 
Selected Currencies
$ strengthened +0.0004 versus € (+0.03%) at 1.1831 ($: YTD: -5.36%; 5YR: -5.9%)
€ strengthened +0.0023 versus £ (-0.21%) at 1.1168 (€: YTD: 5.78%; 5YR: 22.5%)
$ strengthened +0.0033 versus £ (+0.25%) at 1.3212 ($: YTD: 0.38%; 5YR: 13.6%)
¥ unchanged 0.0000 versus $ (0.00%) at 106.2600 (¥: YTD: -2.18%; 5YR: 12.3%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.14 (-0.34%) at 41.19 (YTD: -37.99%; 5YR: -12.2%)
WTI Crude ($/bbl) down -1.60 (-3.87%) at 39.77 (YTD: -34.87%; 5YR: -13.6%)
Gold ($/ozt) up +4.25 (+0.22%) at 1931.40 (YTD: 26.83%; 5YR: 72.6%)
Copper ($/mt) up +146.50 (+2.23%) at 6710.00 (YTD: 8.68%; 5YR: 31.1%)
 
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