Please find this week’s edition of Weekly Digest attached. We have recently released ‘Inside Out of the Ordinary’, a series of short videos documenting how we think about investments and introducing some of the key individuals who direct our investment strategy. You can watch ‘Inside Out of the Ordinary’ here.
The news of the increased spread of the coronavirus impacted global markets today, with the FTSE 100 closing down 3.5%. At the time of writing, the S&P 500 is off 2.8%. Japan’s markets are closed for a holiday. The news flow has taken a decidedly more negative tone and the first cases of the virus have been reported in Afghanistan, Kuwait, and Bahrain, raising concerns about the prospect of a global pandemic. Globally confirmed cases now stand at 79,138. Italy has cancelled the Venice Carnival and other events amid a rising number of cases. The country now has 157 confirmed cases and 3 deaths, and has locked down several towns in Lombardy and Veneto, with c. 50,000 citizens there unable to travel without special permission.
The flight to safety has benefitted bond markets today. The yield on the 10-year US treasury has fallen to 1.37%, in the UK the yield on the 10-year gilt fell to 0.52%, while in Germany the yield on the 10-year Bund to yield minus 0.48%. Gold, another perceived safe haven, is trading up 1.5% to $1,674 per ounce. In commodity markets, Brent crude oil is down 5% to $55 per barrel.
In terms of the impact on specific stocks, Easyjet closed down 16.7% due to the disruption in Italy, which is a significant market for the company. LVMH fell 4% amid fears that there will be far fewer Chinese tourists purchasing luxury goods when on holiday abroad.
In the US, Bernie Sanders looks set to win the latest Democratic primary in Nevada. Joe Biden looks to have rebounded from his disappointing start to the campaign and is on track for second place with 21% of the vote. Tomorrow, we have the final Democratic presidential debate in South Caroline tomorrow.
Last week, US data showed business activity contracting for the first time since 2013, increasing worries that the coronavirus outbreak is affecting supply chains and the economy more than initially thought. The UK’s reading showed manufacturing production growth rising to its strongest since April, with survey respondents noting that the clarity surrounding politics since the general election has manifested into higher business activity but also reporting that the coronavirus has weighed on overseas orders. The European data were slightly better than expected, particularly the Services elements of these surveys.
The corporate results season continues this week, with updates from Palo Alto Networks, Rio Tinto, Taylor Wimpey, WPP, Reckitt Benckiser and Beyond Meat among others