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8th September 2020

08/09/2020

Market Data and Morning Chat

Europe scores on the rebound: Friday was messy for equities leading to a negative September opening.  The US – down initially – at least offered an afternoon rally to leave sentiment battered & bruised, but possibly in a forgiving mood. Yesterday, with the US closed for Labor Day (their spelling), Europe was free to run with the sentiment.  Data-wise it did kick off with weaker-than-hoped German industrial production, but recovered instantly. From then European indices rallied strongly – well bar tech (-2.1%) & communications (-1.4%) – as consumer cyclical (+2.5%), materials (+1.7%) and industrials (1.1%) led the way back to an overall positive September.

Oh yes, Brexit: Okay, except for the UK.  Wait – we did close up nearly 2½% yesterday, we just didn’t get back to positive territory for September. UK equities are about -½% this month versus the Continent’s +1¼-2¼% with sterling investors gaining an extra ½% from the pound’s slip triggered by the Brexit negotiations (after strengthening 4½% over the summer).  Like a case of Déjà vu all over again the same stumbling blocks – fishing rights, level playing field & Northern Ireland – are prompting negotiators to restate concerns for a no-deal outcome while the government resets to a new October 14th deadline,

Wave through: Many are rightfully concerned about an imminent second Covid-19 wave. Spain’s cases started rising early-July and alongside France are now at levels akin to their spring peaks. Meanwhile, UK cases are edging up and are as high now as late-March. Moreover, while the UK death rate hasn’t risen noticeably, it is marginally above the 20-year average by as much as it was above then despite a summer below the average. But consider this, markets actually tumbled late-February to the March 23 low, and then started recovering.  Thus markets crashed before the wave, and actually rode the wave higher.
 
 Equity futures foreshadow a modestly positive day, though tech stocks look pressured again
 … meanwhile Asia continues yesterday’s European gains amid improved Chinese exports
 … and Japanese stimulus hopes after weaker-than-hoped GDP and household spending data
 Japan’s July run-up in Covid cases corresponded with a 6.5% decline in household spending…
 … but their cases over August show a steady drop back to only 20% of recent peak
 Meanwhile German exports slightly less-than-hoped while import growth remains muted
 Biden’s polling in Wisconsin and other swing states improves by 1-2% helping election odds
 Analyst downgrade make International Airlines Group (-4.7%) fly to the bottom of UK equities
 … while turn-around specialist Melrose (+5.8%) continues strong run at the top of the table   

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Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +3.13 (+0.22%) at 1,415 (YTD: 2.89%; 5YR: 65.8%)
MSCI AC World Equities (USD) up +36.65 (+0.36%) at 10,351 (YTD: 3.73%; 5YR: 67.4%)
Barclays Global Aggregate Bonds up +0.14 (+0.03%) at 541 (YTD: 5.75%; 5YR: 21.5%)
 
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 up +53.48 (+1.64%) at 3,314 (YTD: -11.51%; 5YR: 2.5%)
FTSE 100 up +138.32 (+2.39%) at 5,937 (YTD: -21.28%; 5YR: -3.4%)
CAC up +88.65 (+1.79%) at 5,054 (YTD: -15.46%; 5YR: 9.9%)
DAX up +257.62 (+2.01%) at 13,100 (YTD: -1.12%; 5YR: 27.5%)
Nikkei 225  up +184.18 (+0.80%) at 23,274 (YTD: -1.62%; 5YR: 33.6%)
Hang Seng up +45.68 (+0.19%) at 24,635 (YTD: -12.61%; 5YR: 15.9%)
MSCI Emerging Markets down -4.94 (-0.45%) at 1,095 (YTD: -1.80%; 5YR: 38.5%)
 
Selected Government Bond Yields
US 2 Year down 0.00 at 0.14 (began the year at 1.57; 5 years ago it was 0.73)
US 10 Year down -0.01 at 0.71 (began the year at 1.92; 5 years ago it was 2.18)
UK 10 Year down -0.02 at 0.25 (began the year at 0.82; 5 years ago it was 1.84)
Germany 10 Year down 0.00 at -0.46 (began the year at -0.19; 5 years ago it was 0.68)
France 10 Year up +0.00 at -0.16 (began the year at 0.12; 5 years ago it was 1.10)
Italy 10 Year up +0.01 at 1.06 (began the year at 1.41; 5 years ago it was 1.83)
Japan 10 Year down -0.01 at 0.03 (began the year at -0.02; 5 years ago it was 0.35)
Barclays EM Basket up +0.01 at 3.77 (began the year at 4.27; 5 years ago it was 5.54)
 
Selected Currencies
$ weakened -0.0001 versus € (-0.01%) at 1.1817 ($: YTD: -5.24%; 5YR: -5.7%)
€ strengthened +0.0028 versus £ (-0.25%) at 1.1121 (€: YTD: 6.22%; 5YR: 23.6%)
$ strengthened +0.0033 versus £ (+0.25%) at 1.3141 ($: YTD: 0.92%; 5YR: 14.5%)
¥ strengthened +0.0700 versus $ (+0.07%) at 106.2300 (¥: YTD: -2.21%; 5YR: 12.8%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.13 (-0.32%) at 40.95 (YTD: -38.35%; 5YR: -15.1%)
WTI Crude ($/bbl) down -1.60 (-3.87%) at 39.77 (YTD: -34.87%; 5YR: -13.6%)
Gold ($/ozt) up +3.16 (+0.16%) at 1931.77 (YTD: 26.85%; 5YR: 71.9%)
Copper ($/mt) up +79.00 (+1.18%) at 6789.00 (YTD: 9.96%; 5YR: 31.9%)
 
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