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9th July 2020

09/07/2020

Market Data and Morning Chat

Morning Chat

Here come the Trump: Deutscher girls and young Parisians were disappointed yesterday as European equities slid again, down ½-1½% or a bit more than 1% on average. The financial sector took the most heat with the banks, down 2.7%, responsible for the bulk of it.  European banks, particularly those Asian-exposed, were hit on concern US President Trump is planning to destabilise the Hong Kong-US dollar currency peg (Hong Kong’s dollar has traded in an incredibly narrow 7.72-7.86 range since 1984 bar a day or two). Not that China’s equities noticed – they’re on pace for the longest rally in two years. 
 
The Magnificent five et al: 
The American market also appeared unfazed, posting a modest ¾% gain. While there’s still much concern over the pace of Covid-19 case discovery & concomitant reestablishment of lockdown conditions, the equities posting the most adamant gains included lockdown-release favourites Royal Caribbean (+5.3%), Carnival (+5.2%) & Norwegian (+4.7%) cruise lines and department-store operator Kohl’s (+9.5%). Not that tech was ignored – all of the big five outperformed. The energy sector was the only significant disappointment, down 4.3%, as the EIA inventory data showed a massive 5.7million barrel crude oil build when a 3.1million barrel draw was forecast. 
 
Stand and deliver: 
UK Chancellor Rishi Sunak set out a mini-budget yesterday offering £30billion in tax cuts, give-aways and spending intended to give a kick of adrenalin to get the UK economy pumping.  The headline item – accounting for nearly a third of the money – was the £9.4billion offering £1,000 to firms for each furloughed worker they retained until 2021. Tax cuts accounted for £7.4billion through a stamp duty holiday and a 15% cut in food, accommodation and attractions VAT.  Then £5.6billion of infrastructure spending, and a tasty ½billion for “eat out to help out” vouchers helped round out the offering. 
 
 Today, though, sees the reverse as European equity futures rally and the Americans sag
 … while those Chinese equities continue to rally, gaining 1.5%, as Asian markets also move up
 … oh, wait, Nasdaq futures also moved into positive territory too – nope, down again – call it flat
 The German balance of trade tipped less than hoped at €7.1billion, versus €21.1billion expected
 Japanese machinery orders rise a better-than-hoped 1.7% in May versus the 5.4% fall forecast
 Today’s US initial jobless claims are forecast at 1.375million & continuing claims at 18.95million
 HSBC(-2.9% in UK, -0.5% HK) hit by the peg battle news, Standard Chartered (-1.5%) also falls
 Wirecard (-11.8%) is smoked over a US Justice Dept. inquiry into an online marijuana fraud

Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) up +6.92 (+0.52%) at 1,341 (YTD: -2.51%; 5YR: 49.0%)
MSCI AC World Equities (USD) up +40.75 (+0.42%) at 9,654 (YTD: -3.26%; 5YR: 48.4%)
Barclays Global Aggregate Bonds up +0.83 (+0.16%) at 530 (YTD: 3.61%; 5YR: 20.0%)
 
Selected Equity Indices (Capital returns)

S&P 500 up +24.62 (+0.78%) at 3,170 (YTD: -1.88%; 5YR: 54.5%)
NASDAQ up +148.61 (+1.44%) at 10,493 (YTD: 16.94%; 5YR: 113.2%)
Euro STOXX 50 down -35.47 (-1.07%) at 3,286 (YTD: -12.26%; 5YR: -3.9%)
FTSE 100 down -33.74 (-0.55%) at 6,156 (YTD: -18.38%; 5YR: -6.5%)
CAC down -62.60 (-1.24%) at 4,981 (YTD: -16.68%; 5YR: 4.7%)
DAX down -121.99 (-0.97%) at 12,495 (YTD: -5.69%; 5YR: 13.6%)
Nikkei 225  up +90.64 (+0.40%) at 22,529 (YTD: -4.77%; 5YR: 13.5%)
Hang Seng up +33.28 (+0.13%) at 26,162 (YTD: -7.19%; 5YR: 7.3%)
MSCI Emerging Markets up +17.60 (+1.67%) at 1,070 (YTD: -3.99%; 5YR: 16.3%)
 
Selected Government Bond Yields

US 2 Year unchanged at 0.16 (began the year at 1.57; 5 years ago it was 0.59)
US 10 Year down -0.01 at 0.65 (began the year at 1.92; 5 years ago it was 2.32)
UK 10 Year up +0.00 at 0.18 (began the year at 0.82; 5 years ago it was 1.95)
Germany 10 Year down 0.00 at -0.44 (began the year at -0.19; 5 years ago it was 0.72)
France 10 Year down 0.00 at -0.13 (began the year at 0.12; 5 years ago it was 1.15)
Italy 10 Year up +0.01 at 1.21 (began the year at 1.41; 5 years ago it was 2.17)
Japan 10 Year down 0.00 at 0.02 (began the year at -0.02; 5 years ago it was 0.44)
Barclays EM Basket down -0.02 at 3.78 (began the year at 4.27; 5 years ago it was 5.37)
 
Selected Currencies

$ weakened -0.0022 versus € (-0.19%) at 1.1358 ($: YTD: -1.15%; 5YR: -3.2%)
€ weakened -0.0009 versus £ (+0.08%) at 1.1126 (€: YTD: 6.17%; 5YR: 25.4%)
$ weakened -0.0034 versus £ (-0.27%) at 1.2637 ($: YTD: 4.72%; 5YR: 17.7%)
¥ strengthened +0.0700 versus $ (+0.07%) at 107.2300 (¥: YTD: -1.26%; 5YR: 13.1%)
 
Selected Commodities

Brent Crude ($/bbl) down -0.21 (-0.49%) at 42.86 (YTD: -35.47%; 5YR: -25.7%)
WTI Crude ($/bbl) up +0.28 (+0.69%) at 40.90 (YTD: -33.02%; 5YR: -20.8%)
Gold ($/ozt) down -2.37 (-0.13%) at 1810.27 (YTD: 18.88%; 5YR: 55.9%)
Copper ($/mt) up +44.00 (+0.71%) at 6232.00 (YTD: 0.94%; 5YR: 12.9%)
 

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