Markets Review
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Monthly Markets Review April 2013
14 May 2013
- Global markets posted solid gains in April, despite a raft of weaker-than-expected economic data, as encouraging monetary and political developments boosted risk appetite.
- Eurozone business confidence fell to a five-month low while unemployment in the region hit a new high. However, the formation of a new Italian government boosted optimism and pushed Italian government yields to their lowest since 2010. Portuguese and Spanish government bond yields also fell.
- In Japan, the Nikkei enjoyed a strong month on the back of further aggressive policy from the Bank of Japan. Japanese consumer spending rose 5.2% in March, its highest year-on-year growth in nine years, weakening the yen against the dollar.
- In commodity markets, gold plunged below $1400 per ounce, to its lowest level in more than two years, while industrial metals fell to their lowest levels since mid-2009 as Chinese growth slowed to 7.7% in the first quarter of 2013.
- It was also a positive month for fixed income, with yields falling on most government bonds. The riskier areas outperformed as investors continued to hunt for sources of yield.
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Monthly Markets Review February 2013
7 March 2013
- After a strong start to the year, global markets were relatively flat in February as risk aversion crept back in. Further speculation that the US Federal Reserve (Fed) may bring an early end to quantitative easing weighed on risk assets until Bernanke's dovish comments at the end of the month reassured investors.
- The Italian election and resultant political gridlock was the greatest cause for concern, stoking fears that the recent reform progress made by Europe's third largest economy may be undermined. The deteriorating confidence weighed on global stocks and European indices in particular and led to increased demand for the perceived safe havens of UK gilts and German bunds.
- Elsewhere, Japanese fourth-quarter data revealed the country was still in recession while the UK lost its Moody's Aaa rating. These developments were balanced by strong trade data from the world's largest economies, China and the US.
- Commodities suffered in the general "risk off" environment, with gold, silver and copper down while the US dollar ended the month as one of the best performing currencies.
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Monthly Markets Review January 2013
6 February 2013
- In January, equity markets registered a third consecutive monthly gain, and saw the strongest inflows for more than five years.
- Market sentiment was broadly ‘risk on’ over the month, although the rally was led by a mixture of cyclical and defensives sectors, revealing an element of investor caution.
- Positive prospects for the global economy has lifted sentiment more recently; particularly, better economic data from US and China, as well as receding fears about the fiscal cliff and eurozone sovereign debt crisis. A good start to the fourth-quarter earnings season also boosted share price gains.
- On a regional basis, European markets outperformed. However, the more constructive sentiment towards Europe began to falter at the end of the month following disappointing Spanish fourth-quarter GDP and poor performance within the Spanish banking sector; where earnings results disappointed investors. The country was also plagued by allegations of government corruption, further weighing on sentiment.
- In Asia, Chinese fourth-quarter GDP came in at 7.9%, indicating a pick-up in growth at the end of last year. Equity markets continued to climb in January before the rally came to a halt on the last day of the month after a surprise fall in US fourth-quarter GDP.
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Monthly Markets Review Q4 2012
8 January 2013
- Global equity markets made modest gains, ending the quarter broadly up despite bouts of volatility. However, the rally ran out of steam in some regions, with the US in particular suffering on the back of global growth concerns and the continued brinkmanship surrounding the US fiscal cliff.
- In addition to the worries surrounding the impending fiscal cliff, Hurricane Sandy brought uncertainty to US markets and dampened risk appetite in the quarter. Early fears subsided and optimism prevailed towards the end of the period, but the rally came too late to pull regional equity markets into positive territory before the quarter drew to a close. In December, the Federal Reserve showed its commitment to supporting the economy by announcing the intention to almost double quantitative easing.
- Despite concerns about the eurozone officially entering recession and continued uncertainty over the Greek bailout programme, Europe led the equity market gains over the quarter. As we moved through the quarter, authorities subsequently agreed on the debt restructuring terms for Greece. In addition, eurozone finance ministers took the first step towards banking union; establishing a single supervisory mechanism (SSM), which will see the ECB responsible for the overall functioning of the SSM with direct oversight of up to 200 eurozone lenders.
- In Asia, Chinese data points continued to improve, helping global sentiment while Japanese markets improved markedly thanks to another stimulus package, a weaker yen and the victory of the more pro-business Liberal Democrats.
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Monthly Markets Review July 2012
6 August 2012
- Disappointing global data and further eurozone fears dampened sentiment throughout July but markets ended the period up as shares rallied during the final week of July in hopeful anticipation of European Central Bank (ECB) action to tackle the region's debt crisis.
- Despite approval for a €100 billion bailout for Spanish banks, newsflow pointing to deeper economic problems in Spain's regional administrations forced the country's borrowing costs to the highest levels of the euro era.
- After a strong month in June, peripheral European countries lagged. Elsewhere, the UK posted a disastrous second-quarter GDP and had economic growth forecasts cut by ratings agency Moody's.
- US data was mixed and Chinese second-quarter GDP growth came in at 7.6%. Emerging markets outperformed developed markets, helped by relief over Chinese growth.
- Commodities ended the month higher as accommodative monetary policies and expectations of further actions from eurozone authorities supported risk appetite. Corn and soybean prices rose to new all-time highs, and oil prices remained firm with Brent closing up just over 10%.
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Monthly Markets Review May 2012
8 June 2012
- The eurozone debt crisis continued to weigh on sentiment in May and global equity markets lost ground over the month. Discussion of a possible Greek exit dominated, after failed attempts to put together a governing coalition means the country will head to the polls again on 17 June – a date many believe will mark the fate of Greece’s membership of the single currency union.
- In Spain, 10-year borrowing costs surged to 6.5% as concerns over the country’s banking sector escalated, while a disappointing bond auction saw Italian 10-year bond yields breach 6% for the first time since January.
- In the US, economic data was mixed but continued to indicate that the economy remains resilient while unemployment numbers fell slightly. The Fed decided to stick with forecasts of low interest rates at least until late 2014.
- Elsewhere, worries of a slowdown in China continued, but on the policy front, the central bank cut reserve requirements for banks by 50 basis points while, in Brazil, the falling Real prompted the central bank to sell more than $2 billion in currency derivatives in attempts to prop up the national currency.
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Monthly Markets Review April 2012
3 May 2012
- After a buoyant start to the year, appetite for risk assets waned in April and global markets lost ground. As eurozone economic data continued to disappoint, markets became increasingly nervous; the region suffered an unexpected contraction in economic activity as its PMI fell to its lowest level for five months.
- Spain dominated the headlines towards the end of the month – officially re-entering recession, suffering an S&P downgrade, and seeing 10-year government bonds yields breach the all-important 6% mark. Events surrounding the French presidential election further weakened sentiment, with Hollande's first-round success sparking fears that progress in Europe may be jeopardised.
- Chinese equities were among the best performers on the back of growing confidence that the country will avoid a hard landing, while PMI data boosted sentiment. Softer US data revealed uncertainty over the jobs market, but the Federal Reserve upgraded forecasts for economic growth this year.
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Monthly Markets Review Q1 2012
5 April 2012
- Risk assets have made substantial gains this quarter. Relative calm has been restored in Europe for now; Greece secured a second bailout enabling it to avoid a messy default, and the European Central Bank's efforts to boost liquidity have supported the banking system and eased peripheral bond yields.
- US economic data releases have been very encouraging and have boosted hopes for the global growth outlook. With less of a focus on events in Europe, emerging markets have, for the most part, had a strong run – aided by China's decision to lower banks' reserve ratio requirement (RRR).
- Jitters about the impact of the rising oil price have surfaced at times but have not seriously threatened the quarter's positive rally.
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Monthly Markets Review February 2012
9 March 2012
- Global equity markets had another strong month, finishing in positive territory. Risk assets were buoyed by an agreement – albeit subject to tough conditions – for a second Greek bailout which should see Greece avoid a messy default in March.
- More encouraging data from the US, such as stronger-than-expected US jobs creation, also supported risk appetite. Elsewhere, Japan’s central bank eased monetary policy and set an inflation goal of 1%. Emerging markets continued their strong run helped by China’s decision to lower the bank reserve requirement ratio by another 50 basis points.
- In bond markets, it was a lacklustre month for core government bonds; however, peripheral sovereign debt performed strongly, with Italy in particular continuing to see the yields on its government bonds fall sharply. In credit, high yield and the lower-rated end of investment grade provided the best returns.
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Monthly Markets Review January 2012
7 February 2012
- Global markets began the year with a strong rally, overcoming jitters around the latest Greek debt negotiations and the sabre rattling between Iran and the West.
- The US continued to release encouraging economic data, with the unemployment rate easing, consumer confidence rising and GDP data moving in the right direction. Corporate earnings have generally been supportive, despite management caution over the near term outlook.
- In the eurozone, ECB efforts to boost liquidity generally helped to ease peripheral sovereign yields. At a political level, a more constructive tone among leaders, increased recognition of the need for growth-oriented policies to balance austerity measures and an agreement on Europe’s new fiscal pact gave hope that the worst outcomes for the eurozone could be avoided.
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Monthly Markets Review Q4 2011
21 December 2011
- Equities made gains in the fourth quarter, but failed to prevent most major markets posting an overall loss for the year. Once again, events in the eurozone dominated market movements.
- After heavy selling in the third quarter, investors regained their risk appetite in October. However, political and economic turmoil in Greece and Italy and growing fear that the debt crisis would spread, saw volatility return in November.
- Hopes for the December EU summit supported equities, but, in what has become a familiar pattern, initial relief that a deal had been struck soon gave way to scepticism regarding the substance and efficacy of the agreement to take a step closer to fiscal union. An encouraging bout of US economic data in the final month of the year helped.
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Monthly Markets Review November 2011
16 December 2011
- Having rallied through most of October, volatility returned in November and global equity markets lost ground. In the first half of the month, sentiment was predominantly driven by the political and economic turmoil in Greece and Italy.
- Sentiment deteriorated as Greece proposed a referendum on its bailout package and Italian 10-year government bond yields soared beyond 7% (the level at which debt is considered unsustainable). The events were a precursor to the resignation of both countries’ leaders during the month.
- Growing pressure from the bond markets on core European countries and an unsuccessful bond auction in Germany added to the fear of contagion in the second half of the month.
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Monthly Markets Review October 2011
4 November 2011
- October proved a positive month for global markets, with investors regaining their risk appetite and markets managing to claw back some of the losses sustained in the previous month.
- Equities rallied ahead of the European summit on the back of hopes that greater political urgency would translate into a deal capable of containing the region’s debt crisis. Despite the lack of detail and little guidance around implementation, the deal was initially greeted with optimism before scepticism began to creep back as the month drew to a close.
- Encouraging data from the US, including the non-farm payrolls, generally strong quarterly earnings results, and September’s retail sales figures also helped, reviving hopes that the world's largest economy may avoid heading back into recession.
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Monthly Markets Review Q3 2011
4 October 2011
- Investor confidence plummeted during the quarter, fuelled by ongoing European political and economic turmoil, disappointing US GDP data and concerns of slowing global growth.
- Heightened risk aversion favoured safe haven assets, with US treasuries, UK gilts and German bunds benefiting from the flight to quality; while global equity markets saw some of the steepest quarterly share price declines since 2008.
- Meanwhile, volatility in the gold price reached its highest level since 2008. Usually seen as a safe haven, the yellow metal tumbled after hitting a high of $1,920 per ounce in September.
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Monthly Markets Review August 2011
6 September 2011
- August provided a gloomy backdrop for markets as worries about slowing global growth, a stalling recovery in the US and the sustainability of peripheral European sovereign debt levels, combined to batter investor sentiment during the month.
- Despite US policymakers reaching a compromise deal to extend the federal debt ceiling and stave off default, ratings agency Standard & Poor’s deemed the cuts insufficient for the country to maintain its AAA credit rating, and subsequently downgraded the US to AA+.
- In Europe, amid escalating concerns about the state of public finances in peripheral European countries, the European Central Bank (ECB) bought Irish, Portuguese, Spanish and Italian government debt, in an effort to shore up confidence.
- Risk aversion prompted an indiscriminate sell off in equity markets and saw investors flee to safe havens, helping government bond markets outperform, while gold rocketed to a new nominal high of US$1913.50 per ounce during the month.
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Monthly Markets Review July 2011
4 August 2011
- With the exception of Japan, global equity markets produced lacklustre returns in July, as macroeconomic issues weighed on sentiment during the month.
- In Europe, wrangling over the bail-out terms for Greece unsettled markets before policymakers reached agreement later in the month, while fears of contagion saw peripheral country debt yields surge.
- US markets were preoccupied with the threat of a ratings downgrade for US Treasuries, as the Democrat and Republican parties struggled to come to a compromise deal to extend the federal debt ceiling and stave off default.
- The uncertainty created by US policymakers’ brinkmanship, along with escalating contagion fears in Europe, prompted a flight to safety. Yields on German and UK government bonds fell while gold hit a record high.
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Monthly Markets Review Q2 2011
26 July 2011
- Global equity markets made a strong start to the quarter, as a continued pickup in M&A activity and generally better-than-expected earnings buoyed investors’ hopes for global growth.
- Gains were reversed in May as markets questioned the stability of the global economic recovery and contemplated the deterioration of Greece’s sovereign debt situation.
- However, a strong market rally in the final days of the quarter, after the Greek parliament passed the austerity bill needed to secure additional financial aid, helped equity markets recover some of the lost ground.
- As risk appetite dwindled, bond markets benefited from the flight to safety during the quarter. 10-year yields in the core sovereign bond markets of the US, Germany and UK fell steadily, before climbing sharply in the final days of the quarter as a temporary solution to Greece’s debt situation emerged.
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Monthly Markets Review April 2011
13 May 2011
- In April, Japan was dealt a blow as additional earthquakes caused further structural damage and hampered efforts to contain the nuclear fallout at Fukushima. Markets in Europe took further sovereign downgrades in their stride, while ratings agency S&P triggered speculation that it could lower its long-term credit rating of the US after instituting a ‘negative’ outlook.
- Despite these dampening effects, global markets posted solid gains over the month (in US dollar terms), as leading economic indicators continued to support a broad-based recovery. Encouraging earnings releases and an uptick in M&A activity also boosted investor confidence.
- In Europe, the central bank hiked interest rates from 1% to 1.25%, following a two-year period when rates remained unchanged at exceptionally low levels. As widely anticipated, the Bank of England left interest rates unchanged at 0.5% in April.
- Returns from international markets, expressed in US dollars, were enhanced as the dollar weakened during the month. On the flipside, the currency
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Quarterly Markets Review Q1 2011
7 April 2011
- The positive momentum from the fourth quarter of 2010 continued to propel equity markets in 2011, before a cocktail of events conspired to halt the progress. Ongoing unrest in North Africa and the Middle East, further peripheral European sovereign debt downgrades and the fallout from the Japanese earthquake and tsunami, unsettled markets and drove down global equity market indices. Although the quarter was not without its casualties, many markets managed to claw back some of the losses to remain in positive territory overall.
- Robust investor confidence favoured risk assets on the whole. Commodity prices soared, with Middle East tensions continuing to push oil prices higher. Despite periods of strength for safe haven assets, government bonds generally weakened, with investors favouring corporate bonds, particularly high yield.
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Monthly Markets Review January 2011
10 February 2011
- In January, global equity markets extended fourth-quarter 2010 gains, supported by generally better-than-expected company earnings and well-received peripheral European government bond auctions. The debut bond issue from the European Financial Stability Facility (EFSF) was also met with strong demand.
- However, mounting geopolitical tension in the Middle East, notably Egypt, prompted a pullback in risk appetite towards the end of the month, in favour of safe-haven assets such as the yen and US treasuries. The turmoil also sparked oil-supply concerns, propelling the Brent Crude oil price to $100 per barrel for the first time since October 2008.
- In Asia, the Chinese economy grew more rapidly than expected in the fourth quarter of 2010 pushing domestic equities to a four-month low, as investors anticipated further anti-inflation action by authorities.
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Quarterly Markets Review Q4 2010
18 January 2011
- Global markets were influenced by both positive and negative sentiment during the quarter, but a combination of better-than-expected macroeconomic data and improved prospects for the US economy drove equity market gains overall.
- The quarter was not without its troubles with re-emerging sovereign debt concerns weighing on sentiment in November. However, a second round of US quantitative easing and a more positive outlook for global growth, brought optimism back to the markets.
- Improved risk appetite favoured more cyclical areas of the market, with the materials and energy sectors, in particular, benefiting from soaring commodity prices.
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Monthly Markets Review November 2010
7 December 2010
- In contrast to the market gains witnessed in expectation of a further round of US quantitative easing, the reaction in the wake of the announcement itself proved something of a muted affair.
- Rather, sentiment in November was dominated by the fate of the debt-laden Irish economy. Perhaps with the exception of Japan, markets globally failed to remain immune to the turmoil in Ireland and concerns of contagion risk across peripheral Europe. An emergency €85 billion aid package to Ireland did little to improve sentiment.
- Japan was the stand-out performer over the month, benefiting from a pull-back in the yen. Not even concerns over escalating tensions between North and South Korea, and further signs of tightening in China, could derail the market’s performance.
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Monthly Markets Review October 2010
5 November 2010
- Expectations of further quantitative easing led markets higher in October, with the eurozone leading equity market gains. Corporate bonds generally outperformed government bonds, while the search for yield continued apace.
- On balance, macroeconomic data proved encouraging. In particular, signs of improvement in US housing, consumer confidence and manufacturing data cheered investors, as did evidence of growth in Europe. In Asia, Chinese manufacturing data accelerated; while in the UK, preliminary GDP growth surprised to the upside.
- The macroeconomic momentum, combined with strength in the corporate sector, provided a fertile environment for ongoing risk trading during the month – albeit at a more subdued pace.
- Risk appetite further strengthened commodity prices in October, while the US dollar continued to decline against most major currencies, in anticipation of another round of quantitative easing.