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15 January 2020

15/01/2020

Market Data and Morning Chat

Morning Chat 

Earnings start with a bank.. or three: America’s 2019 calendar Q4 earnings season has begun with JP Morgan, Citibank and Wells Fargo kicking off. It was a case of two out of three ain’t bad. JP Morgan (+1.2%) saw a surprising and significant 86% upswing in revenues from bond trading that trounced estimates by $800million helping the bank beat both profit and revenue forecasts – makes you wonder why it was up only 1.2%. Citibank (+1.6%) echoed the performance with a 49% rise in their bond trading. Wells Fargo (-5.4%), however, saw profits disappointingly halve from last year on legal fees.

Even an airline couldn’t make the market take off: Delta Airlines (+3.3%) rounded out the big name opening acts for the earnings season and they offered substantially better earnings than expected thanks to stronger high-end seat sales. However, despite a solid start to reports, the US equity markets closed marginally down. For one, the US-China trade deal is due to be signed today and details remain sparse though it’s still looking to go ahead, so that’s good. There’s a concern though the US market, which is at an all-time high might be too expensive for a weak deal to support.

Really, really long-term bond trends: The weak UK November GDP heightened rate cut probabilities to 47 and despite 2019’s closing rally, there’s still £10trillion of global government debt yielding negative yields-to-maturity. Paul Schmelzing’s just-published Staff Working Paper 845 for the Bank of England posits the trends are not anomalies. Collecting data back to the time of the Black Plague in 1311 – yes, over 700 years – he’s calculated that global real interest rates have been on a declining trend of 0.6-1.6 basis points (call it 0.011%) per annum and the current low rates are just a return to the ultra-long-term trend.

For those interested, Paul Schmelzing’s paper is available on the Bank of England website
Market futures glowing a light red in anticipation of the signing of the US-China phase one deal
… while Nancy Pelosi is expected to send impeachment papers to the Senate today 
Leo Varadkar hoping to be focus of Eire voters rather than voters ire in calling snap Irish election
Games Workshop (+9.2%) isn’t just playing around as the company reports record sales & profits
Flybe lands UK government agreement for additional funding to stave of collapse
FedEx (+1.8%) finds their canoe has a paddle again as Amazon lifts Prime shipping ban

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +0.24 (+0.02%) at 1,401 (YTD: 1.85%; 5YR: 64.7%)
MSCI AC World Equities (USD) up +1.72 (+0.02%) at 10,112 (YTD: 1.33%; 5YR: 62.9%)
Barclays Global Aggregate Bonds up +0.25 (+0.05%) at 511 (YTD: -0.19%; 5YR: 11.5%)
    
Selected Equity Indices (Capital returns)    
S&P 500 down -4.98 (-0.15%) at 3,283 (YTD: 1.62%; 5YR: 64.8%)    
NASDAQ down -22.60 (-0.24%) at 9,251 (YTD: 3.11%; 5YR: 102.4%)    
Euro STOXX 50 down -4.80 (-0.13%) at 3,775 (YTD: 0.79%; 5YR: 19.6%)    
FTSE 100 up +4.75 (+0.06%) at 7,622 (YTD: 1.06%; 5YR: 17.3%)    
CAC up +4.75 (+0.08%) at 6,041 (YTD: 1.05%; 5YR: 39.7%)    
DAX up +4.97 (+0.04%) at 13,456 (YTD: 1.57%; 5YR: 34.1%)    
Nikkei 225  down -108.59 (-0.45%) at 23,917 (YTD: 1.10%; 5YR: 39.8%)    
Hang Seng down -173.23 (-0.60%) at 28,712 (YTD: 1.85%; 5YR: 17.9%)    
MSCI Emerging Markets down -0.14 (-0.01%) at 1,144 (YTD: 2.62%; 5YR: 19.2%)    
    
Selected Government Bond Yields    
US 2 Year down 0.00 at 1.57 (began the year at 1.57; 5 years ago it was 0.41)    
US 10 Year down -0.01 at 1.80 (began the year at 1.92; 5 years ago it was 1.71)    
UK 10 Year down -0.03 at 0.72 (began the year at 0.82; 5 years ago it was 1.51)    
Germany 10 Year down -0.02 at -0.19 (began the year at -0.19; 5 years ago it was 0.47)
France 10 Year down -0.02 at 0.06 (began the year at 0.12; 5 years ago it was 0.67)    
Italy 10 Year up +0.02 at 1.41 (began the year at 1.41; 5 years ago it was 1.74)    
Japan 10 Year down -0.01 at 0.00 (began the year at -0.02; 5 years ago it was 0.25)    
Barclays EM Basket down -0.02 at 4.20 (began the year at 4.27; 5 years ago it was 5.13)
    
Selected Currencies    
$ weakened -0.0004 versus € (-0.04%) at 1.1135 ($: YTD: 0.84%; 5YR: 4.0%)    
€ weakened -0.0006 versus £ (+0.05%) at 1.1704 (€: YTD: 0.93%; 5YR: 11.6%)    
$ weakened -0.0011 versus £ (-0.08%) at 1.3033 ($: YTD: 1.73%; 5YR: 14.0%)    
¥ strengthened +0.1900 versus $ (+0.17%) at 109.9100 (¥: YTD: 1.21%; 5YR: 6.2%)    
    
Selected Commodities    
Brent Crude ($/bbl) down -0.03 (-0.05%) at 64.85 (YTD: -2.36%; 5YR: 40.0%)    
WTI Crude ($/bbl) up +0.15 (+0.26%) at 58.23 (YTD: -4.63%; 5YR: 20.1%)    
Gold ($/ozt) up +8.57 (+0.56%) at 1552.20 (YTD: 1.93%; 5YR: 23.0%)    
Copper ($/mt) up +12.00 (+0.19%) at 6302.00 (YTD: 2.07%; 5YR: 13.6%)    
    
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