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3 January 2020

03/01/2020

Market Data and Morning Chat

Morning Chat 

Still cooking with the leftovers: 2019’s equity enthusiasm continued into 2020 trading on ongoing optimism for US-China trade with the added spice of Chinese economic stimulus.  The People’s Bank of China cut their banking reserve ratio – the cash amount banks must maintain as a proportion of deposits – thus freeing three quarters of a trillion yuan (around £85billion) for lending and investment leading to a ¾% to 1½% gain for most major markets. The boost to China’s economy also meant tech stocks were tastiest ingredient in the recipe, with the sector up nearly 2% led by Advanced Micro Devices 7.1% jump.

 Markit numbers a mixed side-dish: The worry was the Markit manufacturing PMI numbers would be disappointing and dampen any carry-over sentiment from 2019.  The hope was the year-end numbers would be better than the forecasts and give a further lift. The good news? Germany’s and France’s data was not a weak as feared – enough to lift the Euro-area number above the weak expectations too. The UK, US and Spanish data was about as good as hoped, while Italy, Mexico and Canada were disappointing. Overall, not enough to get in a stew about – unless you’re Italian – but not overly tasty either.

Though Markit flavoured the bond market: The headline US Markit data, while pretty much as expected, was 0.1 lower than hoped.  Given better-than-expected optimism data and lower unemployment filings, one might have expected US treasury yields to rise, but they declined by around 4-5 basis points, implying the focus was on the weaker headline number. That corresponds to the reactions served up in Europe where yields were higher in line with the slightly better continental numbers, and lower in the UK and Italy where the PMI data disappointed. After last year’s significant shift lower, bonds are still assuming slower growth. 

The US airstrike killing Iranian General Solemani knocks futures and hikes gold & oil price
Minutes of the last US Federal Reserve meeting hinting at coming rate direction released today
Tui (+3.9%) and Barclays (+3.1%) took top honours in the UK market yesterday…
… while British Land (-1.7%) took the wooden spoon giving ground after strong year-end rally

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +11.58 (+0.84%) at 1,387 (YTD: 0.84%; 5YR: 59.7%)
MSCI AC World Equities (USD) up +74.72 (+0.75%) at 10,054 (YTD: 0.75%; 5YR: 58.0%)
Barclays Global Aggregate Bonds up +0.67 (+0.13%) at 512 (YTD: 0.13%; 5YR: 12.4%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +27.07 (+0.84%) at 3,258 (YTD: 0.84%; 5YR: 58.3%)    
NASDAQ up +119.58 (+1.33%) at 9,092 (YTD: 1.33%; 5YR: 92.4%)    
Euro STOXX 50 up +48.09 (+1.28%) at 3,793 (YTD: 1.28%; 5YR: 20.8%)    
FTSE 100 up +61.86 (+0.82%) at 7,604 (YTD: 0.82%; 5YR: 16.1%)    
CAC up +63.44 (+1.06%) at 6,042 (YTD: 1.06%; 5YR: 42.1%)    
DAX up +136.92 (+1.03%) at 13,386 (YTD: 1.03%; 5YR: 37.1%)    
Nikkei 225  down -181.10 (-0.76%) at 23,657 (YTD: 0.00%; 5YR: 35.6%)    
Hang Seng down -63.25 (-0.22%) at 28,480 (YTD: 1.03%; 5YR: 19.4%)    
MSCI Emerging Markets up +13.37 (+1.20%) at 1,128 (YTD: 1.20%; 5YR: 18.3%)    
    
Selected Government Bond Yields    
US 2 Year down -0.04 at 1.53 (began the year at 1.57; 5 years ago it was 0.66)    
US 10 Year down -0.05 at 1.83 (began the year at 1.92; 5 years ago it was 2.11)    
UK 10 Year down -0.03 at 0.79 (began the year at 0.82; 5 years ago it was 1.72)    
Germany 10 Year down -0.02 at -0.25 (began the year at -0.19; 5 years ago it was 0.50)
France 10 Year down -0.02 at 0.05 (began the year at 0.12; 5 years ago it was 0.78)    
Italy 10 Year down -0.10 at 1.31 (began the year at 1.41; 5 years ago it was 1.74)    
Japan 10 Year down -0.02 at -0.03 (began the year at -0.02; 5 years ago it was 0.32)    
Barclays EM Basket up +0.01 at 4.28 (began the year at 4.27; 5 years ago it was 5.40)
    
Selected Currencies    
$ strengthened +0.0011 versus € (+0.10%) at 1.1159 ($: YTD: 0.62%; 5YR: 7.1%)    
€ strengthened +0.0014 versus £ (-0.12%) at 1.1746 (€: YTD: 0.57%; 5YR: 8.9%)    
$ strengthened +0.0025 versus £ (+0.19%) at 1.3110 ($: YTD: 1.15%; 5YR: 14.6%)    
¥ strengthened +0.5000 versus $ (+0.46%) at 108.0300 (¥: YTD: -0.51%; 5YR: 11.3%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +1.92 (+2.88%) at 68.54 (YTD: 3.19%; 5YR: 23.1%)    
WTI Crude ($/bbl) up +0.12 (+0.20%) at 61.18 (YTD: 0.20%; 5YR: 16.1%)    
Gold ($/ozt) up +15.59 (+1.02%) at 1540.93 (YTD: 1.19%; 5YR: 29.8%)    
Copper ($/mt) up +14.00 (+0.23%) at 6188.00 (YTD: 0.23%; 5YR: -1.1%)    
    
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