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14 January 2020

14/01/2020

Market Data and Morning Chat

Morning Chat

When -0.3% = +0.1%: The UK economy was forecast to have seen no growth in November and therefore decline 0.1% on a rolling three months. But it didn’t.  November GDP shrank 0.3%, so you might expect the rolling three month number must be lower than the 0.1% forecast. Only it wasn’t. Confusing. However, due to revisions to the previous September and October estimates on stronger construction numbers, it’s led to a three-month growth pace of 0.1%. Still, the headline “November GDP falls 0.3%” even if incomplete has boosted expectations for a rate cut and thus lifted yesterday’s UK equity market.

Germany’s policy of tax and spen… er, maybe not: Germany’s government is renowned for budgetary restraint with its policy of schwarze null or black zero – the name for targeting a balanced budget.  The steadfast adherence to schwarze null has led to international frustration. Many believe Germany’s government should be spending more to boost the economy. The announcement yesterday that Germany generated a record budget surplus of €13.5billion, albeit from reduced financing cost thanks to low and negative interest rates – “a bit of luck” as Finance Minister Scholz noted – is likely to intensify calls for a change in German spending policy.

We’re sooo close: It’s the 14th today.  Assuming no disruption at the 11th hour, the US and China are due to sign their Phase One trade deal tomorrow.  It’s what has made markets madly gyrate about for over a year and a half, triggering rallies and drops on speculation, and yet the details of the deal remain somewhat vague. Broadly, the deal sees a reversal of most US tariffs, an increase in Chinese purchases of US agricultural and seafood goods and initial reforms of China’s forced technology transfers, but how’s it enforced? Tomorrow will tell. Wait, there’s a tweet…. Kidding.

Futures are a bit muddled – Europe is up, the US down – and Asian indices are mixed
… though numerous markets – US, Canada, Australia, Russia, and more – hit new all-time highs
UK exports grew faster than imports to an all-time high pushing trade deficit to 14-year low
Chinese exports also rose more than expected, up 7.6% year-on-year, but the trade surplus fell
AstraZeneca (+0.1%) slips a beat behind the market on failure of new heart drug trials
Lloyds (-2.6%) shares rally checked as ¼% rate cut probabilities rise from 5% to 47%  

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +7.58 (+0.54%) at 1,400 (YTD: 1.83%; 5YR: 64.2%)
MSCI AC World Equities (USD) up +45.01 (+0.45%) at 10,110 (YTD: 1.31%; 5YR: 62.6%)
Barclays Global Aggregate Bonds down -0.48 (-0.09%) at 510 (YTD: -0.24%; 5YR: 11.1%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +22.78 (+0.70%) at 3,288 (YTD: 1.78%; 5YR: 63.5%)    
NASDAQ up +95.07 (+1.04%) at 9,274 (YTD: 3.36%; 5YR: 99.9%)    
Euro STOXX 50 down -9.84 (-0.26%) at 3,780 (YTD: 0.92%; 5YR: 22.3%)    
FTSE 100 up +29.75 (+0.39%) at 7,618 (YTD: 1.00%; 5YR: 19.2%)    
CAC down -0.97 (-0.02%) at 6,036 (YTD: 0.97%; 5YR: 42.9%)    
DAX down -31.79 (-0.24%) at 13,452 (YTD: 1.53%; 5YR: 37.0%)    
Nikkei 225  up +174.60 (+0.73%) at 24,025 (YTD: 1.56%; 5YR: 40.6%)    
Hang Seng down -128.65 (-0.44%) at 28,826 (YTD: 2.26%; 5YR: 19.5%)    
MSCI Emerging Markets up +10.37 (+0.91%) at 1,144 (YTD: 2.63%; 5YR: 19.7%)    
    
Selected Government Bond Yields    
US 2 Year up +0.00 at 1.59 (began the year at 1.57; 5 years ago it was 0.50)    
US 10 Year up +0.00 at 1.85 (began the year at 1.92; 5 years ago it was 1.86)    
UK 10 Year down -0.02 at 0.75 (began the year at 0.82; 5 years ago it was 1.51)    
Germany 10 Year up +0.00 at -0.16 (began the year at -0.19; 5 years ago it was 0.42)    
France 10 Year down 0.00 at 0.09 (began the year at 0.12; 5 years ago it was 0.65)    
Italy 10 Year up +0.01 at 1.38 (began the year at 1.41; 5 years ago it was 1.72)    
Japan 10 Year up +0.01 at 0.01 (began the year at -0.02; 5 years ago it was 0.25)    
Barclays EM Basket down -0.01 at 4.22 (began the year at 4.27; 5 years ago it was 5.16)
    
Selected Currencies    
$ unchanged 0.0000 versus € (0.00%) at 1.1140 ($: YTD: 0.79%; 5YR: 5.5%)    
€ strengthened +0.0025 versus £ (-0.21%) at 1.1641 (€: YTD: 1.48%; 5YR: 10.9%)    
$ strengthened +0.0028 versus £ (+0.22%) at 1.2967 ($: YTD: 2.23%; 5YR: 14.8%)    
¥ weakened -0.1200 versus $ (-0.11%) at 110.0400 (¥: YTD: 1.33%; 5YR: 6.4%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.05 (-0.08%) at 64.41 (YTD: -3.03%; 5YR: 35.2%)    
WTI Crude ($/bbl) down -0.96 (-1.63%) at 58.08 (YTD: -4.88%; 5YR: 26.6%)    
Gold ($/ozt) down -7.84 (-0.51%) at 1541.96 (YTD: 1.26%; 5YR: 24.5%)    
Copper ($/mt) up +92.00 (+1.48%) at 6290.00 (YTD: 1.88%; 5YR: 7.3%)    
    
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