General Market Review
Global equity markets had a strong month in February, as the US economy has proven to be resilient. Moreover, better than expected earnings reports have supported equity markets. On the other hand, elevated inflation rates have put the bond market under pressure. The US 10-year treasury yield has increased by +34 bps from 3.9% to 4.2% and the German 10-year Bund yield by +20bps from 2.2% to 2.4% as investors have pushed out interest rate cuts further into 2024.
In the US, the consumer price index for the month of January came in at +3.1% vs. 3.4% (headline) and +3.9% (core) vs. 3.9% in the previous month. US economic data was resilient. The labor market has shown further strength. Non-farm payrolls and private payrolls increased by 353k and 317k for the month of January versus a previous reading of 290k and 214k, On the other hand, durable goods orders fell by -6.1% during the month of January, whereas capital goods orders (ex-defense) have increased by +0.1%, respectively.
In Europe, inflation readings were nearly unchanged. The Euro-Area Consumer Price Index came in at 2.8% (headline) and 3.3% (core) for the month of January which was marginally lower than in the prior month.
European economic activity has picked up slightly as purchasing manager indices moved higher. Although, the Eurozone Manufacturing PMI (Purchasing Manager Index) still came in at 47.0 and the Services PMI at 48.1 below the threshold of expansion (50).
In the US over 90% of S&P firms have reported earnings. Three quarters have beaten analyst’s forecasts. The MSCI World Index gained by +4.2% (USD den.) and the MSCI Europe Index gained by + 1.5% (EUR den.).
Energy and Transportation
On the 15th of February, the International Energy Agency (IEA) has trimmed it’s 2024 oil demand growth forecast. The IEA only expects oil demand to grow by 1.2mn barrels per day. This was in stark contrast to the stronger demand outlook of OPEC. According to the IEA the expected deceleration vs. 2023 would be triggered by the slow-down in Chinese consumption during 2024. Despite the weakened demand outlook, oil continued to trade with a political risk premium as Israel and the Hamas were unable to agree to a ceasefire. The price of Brent Oil has increased slightly from $ 81.7 to $83.6.
The Stoxx 600 Oil and Gas Index has lost another -1.3 % in February. After a significant correction of the renewable energy segment in the preceding months, the S&P Global Clean Energy Sector was nearly unchanged during the month of February.
Transportation segments have recorded a solid performance throughout the month. The Dow Jones Transportation Index increased by +2.4% whereas the US Global Jets Index increased by +7.8% in the month of February. On the other hand, the Russell 2000 Marine Transportation Index fell by -0.8%.
The dry bulk segment has stabilized throughout the month. Capesize-rates increased from $16k/day to $31k/day at month end. Container freight rates fell by -6% vs. the previous month. The SCFI (Shanghai Containerized Freight Index) is still up by 127% year-on-year. Crude oil tanker (VLCC – Very Large Crude Carrier) rates have increased from $ 27k/ day to $33k/day at month end, whereas product tanker rates (MR earnings) have somewhat moderated to a level of $40k/day at month end. VLGC (Very Large Gas Carrier) rates have bounced back from $22k/day to $ 44k/at month-end.
Fund Performance
The fund performance of both the USD as well as EUR denominated share classes were positive.
Within transportation both the shipping long as well as short book had an overall positive contribution. Long positions in the dry bulk segment contributed a positive +0.7% whereas product and crude tankers took a breather with a negative contribution of -0.4%. The short shipping book had a positive contribution of +1.2% with the short LPG segment contributing +0,1% and the short container positions contributing +1.0%.
In the area of freight services, the short book was flat at 0.0% and short positions in other transportation segments had contributed +0.3%. Moreover, the aviation long book was able to contribute +0.8%.
Within the energy segment long position in the oil & gas sector had a negative contribution of -0.6% whereas long position in the oil services sector had a positive contribution of +0.1%. The long book in the renewable energy segment had suffered a loss of -0.8%.
Overall hedging positions via short index futures have contributed negatively by ca. -0.3% to the overall performance result.
For more information, you can find our latest Fact Sheet – February 2024.
Seahawk Investments GmbH
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