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9 January 2020

09/01/2020

Market Data and Morning Chat

Morning Chat 

War, what is good for: The Iranians fired a dozen or so missiles at US bases in Iraq with most missing. It would appear they did minimal damage, but it also appears the damage is enough for Tehran’s Foreign Minister Javad Zarif.  He announced Iran took proportionate measures and did not seek escalation of war. Donald Trump’s reply was equally unaggressive – militarily at least.  Both sides opted to shy away from escalating tensions leading the defensive shift to investments to reverse. Oil slipped over 4% to a one-month low, gold eased 1.1% and US equities rallied to new record highs.

Whatever makes our economy grow: The UK Office of National Statistics released the final Q3 labour productivity data and it’s a slight improvement on previous estimates.  Year-on-year output per hour has increased by a whopping, wait for it, 0.1%. Gross value added and hours worked both increased by about 1%, but value added rose marginally more hence the productivity gain.  But, after four quarters of falling productivity, any gain is an improvement.  Yet, it’s still below the post-2007 downturn average 0.3% - a level not seen since the 1800’s - and substantially lower than the 2% pre-2007 10-year average.

I just wanna do my thing: and it appears the average US private worker is getting his chance to do so. It’s not the non-farm payrolls number (due Friday) but it is the next best thing, the ADP survey.  The December data set has private businesses hiring 202,000 new workers, well ahead of the 160,000 forecast, but still within one standard deviation of the estimate. At 173,000 new jobs, the lion’s share of gains – not unusually – were in the trade, transport and utilities (most likely retail for Xmas) and it would not be unreasonable to see some reversal in January.

The green shoots of recovery from the Iran situation are showing in today’s index futures
… likely driven by Chinese news stating Liu He will travel to the US to sign the deal next week
Nice hols? Get ready for Brexit to re-enter the news charts kicked off by von der Leyen’s speech 
… she’s setting a pessimistic can’t do tone for the upcoming post-Jan 31 negotiations
British Retail Consortium’s same store retail sales up 1.7% fed by gains in food sales
… but decline after tailoring for distortions taking in to account shopping days and Black Friday

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +2.05 (+0.15%) at 1,383 (YTD: 0.58%; 5YR: 60.4%)
MSCI AC World Equities (USD) up +19.26 (+0.19%) at 10,018 (YTD: 0.39%; 5YR: 59.3%)
Barclays Global Aggregate Bonds down -1.02 (-0.20%) at 511 (YTD: -0.14%; 5YR: 12.0%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +15.87 (+0.49%) at 3,253 (YTD: 0.69%; 5YR: 59.1%)    
NASDAQ up +60.66 (+0.67%) at 9,129 (YTD: 1.75%; 5YR: 94.1%)    
Euro STOXX 50 up +13.31 (+0.35%) at 3,773 (YTD: 0.73%; 5YR: 24.0%)    
FTSE 100 up +1.08 (+0.01%) at 7,575 (YTD: 0.43%; 5YR: 16.5%)    
CAC up +18.65 (+0.31%) at 6,031 (YTD: 0.89%; 5YR: 44.3%)    
DAX up +93.35 (+0.71%) at 13,320 (YTD: 0.54%; 5YR: 38.1%)    
Nikkei 225  up +535.11 (+2.31%) at 23,740 (YTD: 0.35%; 5YR: 38.0%)    
Hang Seng up +377.60 (+1.34%) at 28,466 (YTD: 0.98%; 5YR: 19.0%)    
MSCI Emerging Markets down -4.44 (-0.40%) at 1,111 (YTD: -0.29%; 5YR: 15.6%)    
    
Selected Government Bond Yields    
US 2 Year up +0.01 at 1.59 (began the year at 1.57; 5 years ago it was 0.56)    
US 10 Year up +0.00 at 1.88 (began the year at 1.92; 5 years ago it was 1.94)    
UK 10 Year up +0.03 at 0.82 (began the year at 0.82; 5 years ago it was 1.60)    
Germany 10 Year down -0.04 at -0.25 (began the year at -0.19; 5 years ago it was 0.49)
France 10 Year up +0.02 at 0.07 (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 1.88)    
Japan 10 Year down -0.01 at -0.03 (began the year at -0.02; 5 years ago it was 0.27)    
Barclays EM Basket up +0.00 at 4.26 (began the year at 4.27; 5 years ago it was 5.22)
    
Selected Currencies    
$ strengthened +0.0003 versus € (+0.03%) at 1.1115 ($: YTD: 1.02%; 5YR: 6.0%)    
€ weakened -0.0002 versus £ (+0.02%) at 1.1790 (€: YTD: 0.20%; 5YR: 8.6%)    
$ unchanged 0.0000 versus £ (0.00%) at 1.3105 ($: YTD: 1.19%; 5YR: 13.5%)    
¥ weakened -0.1900 versus $ (-0.17%) at 109.2900 (¥: YTD: 0.65%; 5YR: 8.5%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.43 (-0.65%) at 65.46 (YTD: -1.45%; 5YR: 32.6%)    
WTI Crude ($/bbl) down -3.09 (-4.93%) at 59.61 (YTD: -2.37%; 5YR: 22.2%)    
Gold ($/ozt) down -16.52 (-1.06%) at 1545.47 (YTD: 1.49%; 5YR: 26.9%)    
Copper ($/mt) up +29.00 (+0.47%) at 6178.00 (YTD: 0.06%; 5YR: 1.2%)    
    
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