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27 January 2020

27/01/2020

Market Data and Morning Chat

Morning Chat

Couldn’t manufacture a gain: European equities closed last week on a ½ to 1½% gain depending on exchange.  Big markets – UK, France and Germany – gained ¾ to 1¼%. Friday gains came on strong Markit manufacturing PMI numbers with British, French and German data showing a stronger recovery than forecast. The 51.0 French number is very much into expansion, while, at 49.8, the UK’s score was so close. Germany’s number was still contractionary, but the expectations score was the strongest well over a year. However, the strong data wasn’t enough to drive a weekly gain as earlier coronavirus-led declines proved overpowering. 

While the US caught a cold: The asymptomatic period for the coronavirus – when the symptoms don’t show – is thought to be about 2 weeks, but for investors about a day.  While Europe rose Friday, US equities fell.  OK, weakness in the Markit manufacturing data as it slipped back to 51.7 from 52.5 didn’t help, but Markit numbers don’t tend to be too influential and the services data a six months high.  Rather, looking at the weak names – the airlines and hotels – paired with a second and maybe even third US coronavirus case and you can see how sentiment was infected.

The shadow of Brexit: News this coming week is likely to be dominated by the B-word. If you can believe it, the UK voted to leave the EU three and a half years ago when UK equities were 23% lower, the 10-year bond yield over ¾% higher and the pound about 13% stronger versus the dollar.  We might see a bit of instability in those numbers this week, but unlikely enough to overcome such moves.  Meanwhile, Q4 GDP data for the US, Mexico and Canada alongside US durable goods orders and the Fed rate decision will also have an impact.

A symptom of the Wuhan virus is futures turning red as markets look down today ½ to 1½% 
American Express (+2.8%) shares charge up to all-time high on modestly better guidance
Also at an all-time high, the sun shines on NextEra’s (+1.4%) renewables though revenues miss
Italian 10-year yield falls as Salvini’s Euro-skeptic Lega fails to win Emilia-Romagna by-election
In a weekend for Bernie, Saunders topped the pack in Iowa polls with Biden second or even third

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) down -5.16 (-0.37%) at 1,403 (YTD: 1.99%; 5YR: 60.1%)
MSCI AC World Equities (USD) down -45.42 (-0.45%) at 10,143 (YTD: 1.64%; 5YR: 59.2%)
Barclays Global Aggregate Bonds up +0.44 (+0.09%) at 514 (YTD: 0.44%; 5YR: 12.7%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -30.07 (-0.90%) at 3,295 (YTD: 2.00%; 5YR: 62.4%)    
NASDAQ down -87.57 (-0.93%) at 9,315 (YTD: 3.82%; 5YR: 99.0%)    
Euro STOXX 50 up +42.31 (+1.13%) at 3,779 (YTD: 0.91%; 5YR: 12.1%)    
FTSE 100 up +78.31 (+1.04%) at 7,586 (YTD: 0.58%; 5YR: 11.4%)    
CAC up +52.47 (+0.88%) at 6,024 (YTD: 0.77%; 5YR: 30.3%)    
DAX up +188.26 (+1.41%) at 13,577 (YTD: 2.47%; 5YR: 27.7%)    
Nikkei 225  down -483.67 (-2.03%) at 23,344 (YTD: -1.32%; 5YR: 31.4%)    
Hang Seng up +40.52 (+0.15%) at 27,950 (YTD: -0.85%; 5YR: 12.7%)    
MSCI Emerging Markets down -2.81 (-0.25%) at 1,119 (YTD: 0.42%; 5YR: 13.1%)    
    
Selected Government Bond Yields    
US 2 Year down -0.04 at 1.46 (began the year at 1.57; 5 years ago it was 0.51)    
US 10 Year down -0.03 at 1.65 (began the year at 1.92; 5 years ago it was 1.82)    
UK 10 Year down -0.03 at 0.56 (began the year at 0.82; 5 years ago it was 1.48)    
Germany 10 Year down 0.00 at -0.34 (began the year at -0.19; 5 years ago it was 0.38)    
France 10 Year down -0.01 at -0.09 (began the year at 0.12; 5 years ago it was 0.58)    
Italy 10 Year down -0.16 at 1.07 (began the year at 1.41; 5 years ago it was 1.53)    
Japan 10 Year down -0.02 at -0.04 (began the year at -0.02; 5 years ago it was 0.25)    
Barclays EM Basket down -0.01 at 4.07 (began the year at 4.27; 5 years ago it was 4.93)
    
Selected Currencies    
$ weakened -0.0007 versus € (-0.06%) at 1.1034 ($: YTD: 1.74%; 5YR: 2.8%)    
€ strengthened +0.0013 versus £ (-0.11%) at 1.1848 (€: YTD: -0.30%; 5YR: 13.0%)    
$ strengthened +0.0006 versus £ (+0.05%) at 1.3073 ($: YTD: 1.43%; 5YR: 14.0%)    
¥ strengthened +0.2800 versus $ (+0.26%) at 109.0400 (¥: YTD: 0.42%; 5YR: 8.1%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -1.27 (-2.12%) at 58.74 (YTD: -11.56%; 5YR: 26.2%)    
WTI Crude ($/bbl) down -1.38 (-2.49%) at 54.12 (YTD: -11.37%; 5YR: 19.7%)    
Gold ($/ozt) up +6.64 (+0.42%) at 1578.44 (YTD: 3.65%; 5YR: 22.3%)    
Copper ($/mt) down -61.00 (-1.02%) at 5926.00 (YTD: -4.02%; 5YR: 7.4%)    

Nicholas Lowson Senior Portfolio Manager Kleinwort Hambros