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21 January 2020

21/01/2020

Market Data and Morning Chat

Morning Chat 

India didn’t curry favour with the IMF: Last October, IMF’s economists, concerned over declining business investment, trimmed 0.3% off estimates for 2019 and 2020 global growth. Since then they had been forecasting growth of 3% for 2019 and 3.4% for 2020 & 2021, which, put in context, usually marks the cusp of a global recession – not exactly vindaloo hot.  Now, while increasingly optimistic over the US-China trade deal, they’re more concerned over India’s pace of growth and have cut a further 0.1% off their 2019 & 2020 estimates. At least they forecast UK growth to outpace the rest of Europe.

Thankfully, China didn’t rate it: Each time in the past few years that the IMF has trimmed 0.1% off the global growth prospects there has been a decided settling in the equity markets.  Today was no clear exception, but rather than the multiple percent declines seen in the equities indices in the past, the scale of loss was only by a third to half a percent – Germany actually posted a gain.  Probably the biggest supporting factor for the markets was China’s decision to hold their prime rate steady so as global leaders gather at Davos to discuss the economy calmly.

Land of the rising sun also ignored some setting trends: In a further nod to optimism, Japanese equities also rallied yesterday to a 15-month high and the Bank of Japan held rates static, despite industrial output slipping slightly more than anticipated (although the market has given back some ground today).  Month-on-month, Japanese industrial output slipped by 1.0% in November, though the pace was forecast to slip only 0.9%.  The weakness in global business investment was echoed in the 8.7% decline in production machinery orders and the 2.7% decline in fabricated metals and is also reflective of the weak auto sector.

Equity futures followed the Asian lead as China slipped back over coronoavirus concerns
… the US having been closed for Martin Luther King Day yesterday
BAE (+3.7%) was spot on with a $2billion purchase of Collins Aerospace GPS system
Fever-Tree (-27.2%) shares caught a cold with their 2019 profits decline at the root of the decline
Presidents Macron and Trump have agreed to defer tariffs until at least year end 

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +0.09 (+0.01%) at 1,416 (YTD: 2.95%; 5YR: 63.3%)
MSCI AC World Equities (USD) down -1.65 (-0.02%) at 10,225 (YTD: 2.47%; 5YR: 61.6%)
Barclays Global Aggregate Bonds down -0.21 (-0.04%) at 511 (YTD: -0.19%; 5YR: 11.8%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +12.81 (+0.39%) at 3,330 (YTD: 3.06%; 5YR: 64.6%)    
NASDAQ up +31.81 (+0.34%) at 9,389 (YTD: 4.64%; 5YR: 101.7%)    
Euro STOXX 50 down -9.23 (-0.24%) at 3,799 (YTD: 1.44%; 5YR: 16.2%)    
FTSE 100 down -23.12 (-0.30%) at 7,651 (YTD: 1.45%; 5YR: 13.7%)    
CAC down -22.18 (-0.36%) at 6,079 (YTD: 1.68%; 5YR: 35.5%)    
DAX up +22.81 (+0.17%) at 13,549 (YTD: 2.26%; 5YR: 31.6%)    
Nikkei 225  down -218.95 (-0.91%) at 23,865 (YTD: 0.88%; 5YR: 38.1%)    
Hang Seng down -801.05 (-2.78%) at 27,995 (YTD: -0.69%; 5YR: 15.0%)    
MSCI Emerging Markets down -1.15 (-0.10%) at 1,146 (YTD: 2.78%; 5YR: 17.4%)    
    
Selected Government Bond Yields    
US 2 Year down -0.01 at 1.54 (began the year at 1.57; 5 years ago it was 0.51)    
US 10 Year down -0.02 at 1.80 (began the year at 1.92; 5 years ago it was 1.87)    
UK 10 Year up +0.02 at 0.65 (began the year at 0.82; 5 years ago it was 1.51)    
Germany 10 Year down 0.00 at -0.22 (began the year at -0.19; 5 years ago it was 0.52)    
France 10 Year down 0.00 at 0.03 (began the year at 0.12; 5 years ago it was 0.70)    
Italy 10 Year up +0.00 at 1.35 (began the year at 1.41; 5 years ago it was 1.69)    
Japan 10 Year down -0.01 at -0.01 (began the year at -0.02; 5 years ago it was 0.24)    
Barclays EM Basket down 0.00 at 4.17 (began the year at 4.27; 5 years ago it was 5.06)
    
Selected Currencies    
$ weakened -0.0011 versus € (-0.10%) at 1.1095 ($: YTD: 1.19%; 5YR: 4.1%)    
€ strengthened +0.0007 versus £ (-0.06%) at 1.1722 (€: YTD: 0.78%; 5YR: 11.4%)    
$ weakened -0.0006 versus £ (-0.05%) at 1.3006 ($: YTD: 1.94%; 5YR: 13.9%)    
¥ strengthened +0.1800 versus $ (+0.16%) at 110.0000 (¥: YTD: 1.29%; 5YR: 7.3%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.68 (-1.05%) at 64.01 (YTD: -3.63%; 5YR: 38.6%)    
WTI Crude ($/bbl) up +0.02 (+0.03%) at 58.54 (YTD: -4.13%; 5YR: 20.2%)    
Gold ($/ozt) up +1.68 (+0.11%) at 1562.42 (YTD: 2.60%; 5YR: 20.9%)    
Copper ($/mt) down -14.00 (-0.22%) at 6259.00 (YTD: 1.38%; 5YR: 10.0%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros