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16 December 2019

16/12/2019

Market Data and Morning Chat

Morning Chat 

A winter idyll: Markets rallied as a couple of big issues hanging over investment markets for most of 2019 – and longer – appeared to ameliorate somewhat last week.  Boris Johnson’s Tories winning their biggest mandate in thirty years is expected to reduce Parliamentary squabbling and, like it or not, give some direction to UK Brexit policy.  The results triggered a strong rally in the pound and the more domestic-oriented UK stocks.  Meanwhile, the US and China agreed a phase one deal. While short on precise details, the December 15 tariffs were cancelled and List 4A tariffs halved. Phase two negotiations next.

Joybringer? US equities initially rallied on the trade deal, though gave back some gains as the day wore on. Signs maybe the markets priced much of the news in. So the focus now is the market drivers this week. The flash Markit PMI data could be significant particularly for the UK & Germany where some improvement in the manufacturing PMIs is forecast. Some improvement is also anticipated in US manufacturing sentiment data – the Empire State index and the Markit PMI – although industrial production data could be worse. There’s also the US Jolts report and the UK employment data. Moving stuff.

Japanese suite: The Japanese Tankan survey and industrial production data last week painted a mixed picture. Unhelpfully, hampered by tax hikes, industrial production tumbled 4.5% in October (-7.7% year-on-year) while the Tankan survey shows slowing manufacturing sentiment – akin to the US and Europe situation. However, non-manufacturing sentiment strengthened and manufacturing sentiment should improve with the US-China trade deal.  Unholster improving corporate capital expenditure plans – which still remain above historical averages – and government plans for the first stimulus programme in three years – a £170billion of spending to temper any post-Olympics public spending slowdown and support growth – and there’s reason for optimism.

… all of which means the equity market futures are showing an upbeat start to the week
… aided by today’s China’s industrial production numbers up 6.2% versus the 5.0% expected
Friday’s UK equity gains built on the foundation of solid double-digit gains of house builders…
… with Taylor Wimpey (+14.7%), Barratt (+14.0%) and Berkeley Homes (+14%) leading the pack
The Italian government moves to rescue failing regional bank Banca Popolare di Bari

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +6.16 (+0.46%) at 1,354 (YTD: 24.99%; 5YR: 62.5%)
MSCI AC World Equities (USD) up +44.97 (+0.46%) at 9,808 (YTD: 26.20%; 5YR: 58.8%)
Barclays Global Aggregate Bonds up +2.27 (+0.45%) at 511 (YTD: 6.66%; 5YR: 10.7%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +0.23 (+0.01%) at 3,169 (YTD: 26.41%; 5YR: 60.6%)    
NASDAQ up +17.56 (+0.20%) at 8,735 (YTD: 31.64%; 5YR: 92.1%)    
Euro STOXX 50 up +24.72 (+0.67%) at 3,731 (YTD: 24.31%; 5YR: 22.3%)    
FTSE 100 up +79.97 (+1.10%) at 7,353 (YTD: 9.29%; 5YR: 16.1%)    
CAC up +34.76 (+0.59%) at 5,919 (YTD: 25.12%; 5YR: 44.6%)    
DAX up +61.08 (+0.46%) at 13,283 (YTD: 25.80%; 5YR: 38.9%)    
Nikkei 225  down -70.75 (-0.29%) at 23,952 (YTD: 19.67%; 5YR: 43.0%)    
Hang Seng down -103.81 (-0.37%) at 27,584 (YTD: 6.73%; 5YR: 21.7%)    
MSCI Emerging Markets up +16.20 (+1.51%) at 1,087 (YTD: 12.54%; 5YR: 19.4%)    
    
Selected Government Bond Yields    
US 2 Year up +0.02 at 1.62 (began the year at 2.49; 5 years ago it was 0.55)    
US 10 Year up +0.01 at 1.83 (began the year at 2.68; 5 years ago it was 2.06)    
UK 10 Year down -0.03 at 0.79 (began the year at 1.28; 5 years ago it was 1.78)    
Germany 10 Year up +0.00 at -0.29 (began the year at 0.24; 5 years ago it was 0.60)    
France 10 Year down 0.00 at 0.00 (began the year at 0.70; 5 years ago it was 0.88)    
Italy 10 Year down -0.01 at 1.25 (began the year at 2.74; 5 years ago it was 2.01)    
Japan 10 Year up +0.00 at -0.02 (began the year at -0.01; 5 years ago it was 0.36)    
Barclays EM Basket down 0.00 at 4.21 (began the year at 6.22; 5 years ago it was 5.41)
    
Selected Currencies    
$ weakened -0.0026 versus € (-0.23%) at 1.1142 ($: YTD: 2.71%; 5YR: 10.9%)    
€ weakened -0.0028 versus £ (+0.23%) at 1.2013 (€: YTD: -7.35%; 5YR: 4.9%)    
$ weakened -0.0064 versus £ (-0.48%) at 1.3386 ($: YTD: -5.02%; 5YR: 15.0%)    
¥ weakened -0.1100 versus $ (-0.10%) at 109.4300 (¥: YTD: -0.21%; 5YR: 7.2%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.27 (-0.40%) at 66.63 (YTD: 25.32%; 5YR: 12.6%)    
WTI Crude ($/bbl) up +0.89 (+1.50%) at 60.07 (YTD: 32.28%; 5YR: 3.9%)    
Gold ($/ozt) up +2.42 (+0.16%) at 1477.27 (YTD: 15.27%; 5YR: 23.3%)    
Copper ($/mt) down -26.00 (-0.42%) at 6130.00 (YTD: 2.77%; 5YR: -5.5%)    
    
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