7 November 2019

Morning Chat 

Didn’t produce much: Equity markets were somewhat muted yesterday.  Asian markets were mixed, some up – like Japan – some down – like China – but little change overall.  European and UK markets were a bit more upbeat, though none of the main indices could muster more than ½%.  The Americans, meanwhile, saw little movement at all.  Unsurprising as there was little news to drive the markets one way or another.  Investors still await an imminent (hopefully) conclusion to a US-China phase 1 trade deal, the Markit services PMIs were pretty much as expected, and only the US productivity data saw an unexpected move.

Reading into the number: The US Bureau of Labor announced non-farm annualised productivity fell 0.3% over the third quarter – the first decline in 15 quarters.  Forecasters were expecting a 0.9% gain, so a big miss. Or is it? The productivity data has been issued since 1947 with forecast records back to 1998. Over those last twenty years, productivity averaged 2% but within a -3.5% to 7.5% range (95% confidence). Forecasters generally get the direction right, and are more accurate than random, but a quarter of the time they’re off by more than 2%. This isn’t even one of those times.

Reading a little more: You’ve likely read productivity has been elusive this recovery. Since 2009, US productivity has run at half the pace of the prior 10 years. The UK Conference Board productivity index shows a similar slowing. However, yesterday’s Department of Labor release had an interesting comment to the effect that self-employed workers hours are volatile and made an unusually large contribution to hours worked growth – but not to output gain.  It implies a lot of high-hour, low-pay, variable work which sounds a lot like zero-hour contract work. The temp-work or gig-economy may be well be the productivity thief.

Speaking of which, Uber (-4.3%) was a bit unter as the initial investor lock-up period ended.
Futures show a good shade of green as China says US-China tariffs to be rolled back in phases
Wirecard (-1.2%) posts good profits, but slightly weak forecasts as it fights FT allegations
BMW (+1.0%) solid off-road but not off-track with in-line results and 33% profit increase.
CVS Health (+5.4%) find raising guidance the right prescription on anniversary of Aetna purchase
Cosmetics firm Coty (+13.6%) makes up lost ground with radiant margins and free cash flow

Market Data

Selected Global Aggregates (Total returns, unhedged)    
MSCI AC World Equities (Local) up +0.96 (+0.07%) at 1,322 (YTD: 21.99%; 5YR: 54.4%)
MSCI AC World Equities (USD) up +9.36 (+0.10%) at 9,537 (YTD: 22.72%; 5YR: 50.1%)
Barclays Global Aggregate Bonds up +0.48 (+0.09%) at 509 (YTD: 6.20%; 5YR: 11.0%)
    
Selected Equity Indices (Capital returns)    
S&P 500 up +2.16 (+0.07%) at 3,077 (YTD: 22.73%; 5YR: 51.4%)    
NASDAQ down -24.05 (-0.29%) at 8,411 (YTD: 26.76%; 5YR: 81.6%)    
Euro STOXX 50 up +12.22 (+0.33%) at 3,689 (YTD: 22.90%; 5YR: 20.4%)    
FTSE 100 up +8.57 (+0.12%) at 7,397 (YTD: 9.94%; 5YR: 12.6%)    
CAC up +19.85 (+0.34%) at 5,867 (YTD: 24.01%; 5YR: 40.0%)    
DAX up +31.39 (+0.24%) at 13,180 (YTD: 24.82%; 5YR: 41.8%)    
Nikkei 225  up +26.50 (+0.11%) at 23,330 (YTD: 16.57%; 5YR: 38.2%)    
Hang Seng down -106.02 (-0.38%) at 27,583 (YTD: 6.72%; 5YR: 17.1%)    
MSCI Emerging Markets down -2.36 (-0.22%) at 1,069 (YTD: 10.67%; 5YR: 8.2%)    
    
Selected Government Bond Yields    
US 2 Year up +0.02 at 1.63 (began the year at 2.49; 5 years ago it was 0.50)    
US 10 Year up +0.01 at 1.84 (began the year at 2.68; 5 years ago it was 2.30)    
UK 10 Year down -0.06 at 0.72 (began the year at 1.28; 5 years ago it was 2.20)    
Germany 10 Year down -0.03 at -0.37 (began the year at 0.24; 5 years ago it was 0.82)    
France 10 Year down -0.02 at -0.06 (began the year at 0.70; 5 years ago it was 1.18)    
Italy 10 Year down -0.01 at 0.99 (began the year at 2.74; 5 years ago it was 2.37)    
Japan 10 Year down -0.10 at -0.19 (began the year at -0.01; 5 years ago it was 0.48)    
Barclays EM Basket down -0.01 at 5.45 (began the year at 6.22; 5 years ago it was 5.19)
    
Selected Currencies    
$ strengthened +0.0004 versus € (+0.04%) at 1.1062 ($: YTD: 3.41%; 5YR: 11.0%)    
€ strengthened +0.0010 versus £ (-0.09%) at 1.1609 (€: YTD: -4.13%; 5YR: 9.8%)    
$ strengthened +0.0014 versus £ (+0.11%) at 1.2844 ($: YTD: -0.77%; 5YR: 19.0%)    
¥ unchanged 0.0000 versus $ (0.00%) at 108.9000 (¥: YTD: -0.70%; 5YR: 5.3%)    
    
Selected Commodities    
Brent Crude ($/bbl) up +0.14 (+0.23%) at 62.15 (YTD: 16.89%; 5YR: -24.6%)    
WTI Crude ($/bbl) down -0.88 (-1.54%) at 56.35 (YTD: 24.09%; 5YR: -27.7%)    
Gold ($/ozt) down -2.61 (-0.18%) at 1488.00 (YTD: 16.03%; 5YR: 26.3%)    
Copper ($/mt) down -33.00 (-0.56%) at 5907.00 (YTD: -0.97%; 5YR: -11.3%)    
    
Data sourced from Bloomberg as of the close of last trading day.    
YTD = Year-to-date return; 5YR = five year return