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Aon Retirement and Investment Blog

Weekly Update - 4 April 2016

NEW INTELLECTUAL CAPITAL

  • Sample Annuity Rates. Monthly update for pricing of annuity purchases as of 29 February 2016.
  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. A French version of the March 17th edition is also now available. 
UPCOMING EVENTS MARKET MOVES (as of April 1, 2016)
Equities
  • Global equities had a mixed week, with notable differences between regional returns. Global markets rallied early in the week, driven by dovish comments from the US Federal Reserve (Fed), before partially reversing towards the end of the week due to falling energy prices.
  • The MSCI World Index rose 1.1% over the week but underperformed the S&P 500 which rose 1.8%. On a year to date basis, S&P 500 has outperformed MSCI World (2.0% vs. -0.7).
  • US Small Cap stocks outperformed Large Cap stocks as the Russell 2000 rose 3.6% over the week compared to 1.8% rise by S&P 500. On a year to date basis, Large Cap stocks have outperformed Small Cap stocks (2.0% vs. -1.2%). Growth stocks outperformed the Value stocks last week (2.6% vs. 1.3%) as measured by MSCI USA indices. However, Value stocks have outperformed Growth stocks, returning (2.5% vs. 0.7%) on a year to date basis. 
Bonds
  • 10 year US Treasury yields fell by 13bps to 1.77% over the week and 30 year US Treasury yields fell by 7bps to 2.60%.
  • 20 year TIPS yields fell by 17bps to 0.44% over the week. 20 year Breakeven were 6bps up at 1.53%.
  • Credit spreads were mixed over the week. The Barclays Capital Long Credit Index spread over treasury yields was unchanged at 224bps and the Merrill Lynch US Corporate Index spread ended the week 4bps lower at 169bps. The US high yield bond spread over US treasury yields was 12bps higher at 705bps and the spread of USD denominated EM debt over US treasury yields finished the week 2bps lower at 406bps. 
Commodities
  • The S&P GSCI fell by 3.5% in USD terms over the week. The energy sector fell by 5.9% with the price WTI crude oil falling by 7.3% to USD 35/BBL, as Saudi Arabia commented that the country is unwilling to cut production. Industrial metals marginally rose by 0.4% over the week despite copper prices declining by 2.4% to $4,860/MT. Agricultural prices were 0.9% lower and gold prices fell by 0.7%, finishing the week at $1,212/ounce. 
Currencies
  • The US dollar depreciated against major currencies over the week. The US dollar fell 0.3% against sterling, ending the week at $1.42/£. The US dollar weakened 1.6% against the euro finishing the week at $1.13/€. The Japanese yen strengthened 0.2% against the US dollar ending the week at ¥112.39/$. 
Economic Releases
  • US economic data was encouraging. The jobs report revealed that nonfarm payrolls increased by 215,000 in March, below February’s increase but better than expected. Wage growth also picked up, reaching 2.3% for the year to March, but the unemployment rate ticked up slightly to 5.0%. Housing market data was also strong; the S&P/Case-Shiller 20-City house price index rose by 0.8% over January, ahead of the 0.7% growth expected by analysts. Pending home sales rose by 5.1% over the year to February when analysts had expected a small fall. The manufacturing ISM rose to 51.8 in March, a substantial jump up from February’s sub-50 reading, and beating the consensus estimate of 51.0. Lastly, the core PCE index, the Fed’s preferred measure of underlying inflationary pressures, rose by 1.7% in February, slightly below consensus but the same as the previous month.
  • In Europe, the data continued to point to moderate recovery. Consumer price inflation was estimated to have remained negative in March, albeit with some slight improvement – the annual rate rose from -0.2% to -0.1%. More encouraging was core inflation (which excludes volatile food and energy components), which rose to 1% from 0.8%. In Germany, the various regional CPI reports accumulated to an overall EU harmonized inflation figure of 0.1%, up from -0.2%, beating expectations. Overall, nothing to write home about but it will be interesting to see how, or if, the data react in the coming months to the recently introduced fresh monetary stimulus by the European Central Bank.
  • Japanese economic data had a weak tone over the week. The widely watched Q1 2016 tankan survey painted a weak picture across manufacturing and non-manufacturing sectors. The large manufacturing index fell to 6 from 12, the lowest level since June 2013. The jobless rate edged higher to 3.3% in February from 3.2% in January. Consumption data was mixed; overall household spending rose by 1.2% over the twelve months to February, but retail sales over the same period rose by 0.5%, lower than the 1.6% rise penciled in by analysts. Industrial production contracted by 6.2% over February, more than offsetting January’s 3.7% rise, and the biggest contraction since March 2011.
  • Chinese economic data was also fairly positive. The Caixin manufacturing PMI for March rose to 49.7 from 48.0, ahead of consensus. This was accompanied by a rise in the official manufacturing PMI to 50.2. Lastly, the Westpac-MNI consumer sentiment index rose to 118.1 in March.

Source: Aon Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Datastream. Click here for index descriptions. 

The information contained above should be regarded as general information only. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of acting on this information, particularly in the context of your own objectives, financial situation and needs.Nothing in this document should be treated as an authoritative statement of the law on any particular issue or specific case, nor should it be treated as investment advice. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal or investment advice. Please consult with your independent professional for any such advice. The blog content is intended for professional investors only.


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