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9th September 2020

09/09/2020

Market Data and Morning Chat

Ever wonder there’s no accident after the traffic jam? Many have studied the phenomenon, but work sponsored by the US National Science Foundation suggested a model using waves (solitons, or in this case Jamitons) and unstable flow. Disrupted traffic causes a jam even if individual drivers didn’t behave in a "wrong" way. The jam disperses by rippling back through the line of traffic.  Yesterday’s markets looked something like a soliton. Everyone wants a vaccine. AstraZeneca may have one. Their phase III testing paused over a possible adverse reaction. Suddenly, the vaccine-inspired recovery was disrupted and the effect rippled through markets.

Really? It’s been a data-light couple of days economically. Okay, Monday’s GDP data from Japan and Germany’s latest data didn’t fully hit expectations, but yesterday’s EU Q2 GDP third estimate was a reasonable improvement and more than compensated.  So much for economics. News otherwise has been sparse enough for Brexit to reclaim the front pages. Then there’s AstraZeneca’s vaccine. A delay could defer economic recovery. Given the exuberant spurt by tech stocks recently – like drivers speeding on the motorway - they’ve hit a traffic jam and slowed slightly below the speed limit even though there may not be an accident.

…and the ripples back? Tech-heavy Nasdaq, running in the fast lane, has seen the biggest slip – it qualifies, just, as a 10% correction – while its fastest auto, Tesla, really slammed into reverse declining 22.8% yesterday alone (though it’s still on an eye-watering trailing 708x Price/Earnings ratio, 21x more expensive than Apple or Microsoft & 6x Amazon). The rest of American and European indices also slipped, but by notably less. If the recovery’s delayed oil use would slip and the price would fall. Check, oil’s down around $2.60-3.30 or 6-8½%. Copper? Down nearly 2%. Gold should rally – yep. Definitely seeing ripples.

Ripples are causing the Asian markets & European equity futures to trade slightly lower…
 … but the American future are showing very modest signs of a recovery today, while…
 … AstraZeneca’s delay knocked their US shares by 6.1%, so UK shares will catch cold today
 Worth remembering though – equities are still in positive territory this quarter, well, bar the UK…
 … Brexit was expected to resurface after the summer & UK equity weakness shows it has
 … plus, given AstraZeneca has UK’s highest market capitalisation, it hurts when it falls.
 JD Sports (+9.8%) ran to the top of UK equities yesterday on better-than-expected profits
 …  predictably, oil majors Royal Dutch (-3.3%) and BP (-3.0%) were at the low end of the well
 … and AB Foods (-3.9%) has crumbiest day after a fashionable run over August & September
 A possible US Senate vote Thursday on a new $500billion Covid relief bill might help sentiment
 South Korea has weathered the virus well – unemployment, forecast at 4.2%,  is back to 3.2%

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Market Data

Selected Global Aggregates (Total returns, unhedged)
MSCI AC World Equities (Local) down -27.04 (-1.91%) at 1,388 (YTD: 0.93%; 5YR: 62.1%)
MSCI AC World Equities (USD) down -230.10 (-2.22%) at 10,121 (YTD: 1.42%; 5YR: 63.6%)
Barclays Global Aggregate Bonds up +0.31 (+0.06%) at 541 (YTD: 5.81%; 5YR: 21.7%)
 
Selected Equity Indices (Capital returns)
S&P 500 down -95.12 (-2.78%) at 3,332 (YTD: 3.13%; 5YR: 71.6%)
NASDAQ down -465.44 (-4.11%) at 10,848 (YTD: 20.90%; 5YR: 128.1%)
Dow Jones Industrial down -632.42 (-2.25%) at 27,501 (YTD: -3.64%; 5YR: 69.2%)
Euro STOXX 50 down -46.70 (-1.41%) at 3,267 (YTD: -12.76%; 5YR: -0.1%)
FTSE 100 down -7.10 (-0.12%) at 5,930 (YTD: -21.37%; 5YR: -4.8%)
CAC down -80.20 (-1.59%) at 4,974 (YTD: -16.80%; 5YR: 6.6%)
DAX down -131.95 (-1.01%) at 12,968 (YTD: -2.12%; 5YR: 25.9%)
Nikkei 225  down -241.59 (-1.04%) at 23,033 (YTD: -2.64%; 5YR: 22.7%)
Hang Seng down -234.87 (-0.95%) at 24,389 (YTD: -13.48%; 5YR: 10.2%)
MSCI Emerging Markets down -7.06 (-0.64%) at 1,088 (YTD: -2.44%; 5YR: 34.3%)
 
Selected Government Bond Yields
US 2 Year down 0.00 at 0.14 (began the year at 1.57; 5 years ago it was 0.74)
US 10 Year down -0.02 at 0.66 (began the year at 1.92; 5 years ago it was 2.20)
UK 10 Year down -0.06 at 0.19 (began the year at 0.82; 5 years ago it was 1.87)
Germany 10 Year down -0.01 at -0.51 (began the year at -0.19; 5 years ago it was 0.70)
France 10 Year down -0.01 at -0.21 (began the year at 0.12; 5 years ago it was 1.10)
Italy 10 Year down -0.02 at 1.01 (began the year at 1.41; 5 years ago it was 1.84)
Japan 10 Year down -0.01 at 0.02 (began the year at -0.02; 5 years ago it was 0.36)
Barclays EM Basket down -0.01 at 3.77 (began the year at 4.27; 5 years ago it was 5.53)
 
Selected Currencies
$ strengthened +0.0031 versus € (+0.26%) at 1.1765 ($: YTD: -4.77%; 5YR: -5.4%)
€ strengthened +0.0070 versus £ (-0.64%) at 1.0989 (€: YTD: 7.50%; 5YR: 25.3%)
$ strengthened +0.0117 versus £ (+0.90%) at 1.2928 ($: YTD: 2.53%; 5YR: 15.9%)
¥ strengthened +0.1000 versus $ (+0.09%) at 105.8300 (¥: YTD: -2.60%; 5YR: 14.4%)
 
Selected Commodities
Brent Crude ($/bbl) down -0.24 (-0.61%) at 38.88 (YTD: -41.46%; 5YR: -16.4%)
WTI Crude ($/bbl) down -3.01 (-7.57%) at 36.76 (YTD: -39.80%; 5YR: -20.0%)
Gold ($/ozt) down -12.71 (-0.66%) at 1926.30 (YTD: 26.49%; 5YR: 74.7%)
Copper ($/mt) down -121.00 (-1.78%) at 6668.00 (YTD: 8.00%; 5YR: 24.8%)
 
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