Set Regional Preference
Required Field*
Set geographic preferences to highlight topics of greatest interest of you, written in your base currency.
 




 
 










Aon Retirement and Investment Blog

Weekly Update - 12 December 2016

NEW INTELLECTUAL CAPITAL

  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. A French version of the November 24th issue is also now available. 

Market Moves (Week Ending December 9, 2016)
Equities

  • Equity markets were broadly unperturbed by the result of the Italian referendum as global equities rose over the week with all regions posting positive returns. All three major US equity indices, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite Index, closed the week at record highs. The MSCI World Index rose 3.0%, but marginally underperformed S&P 500 which rose 3.1% over the week. On a year to date basis, S&P 500 has outperformed MSCI World (12.9% vs. 8.6%).
  • US Small Cap stocks outperformed Large Cap stocks as the Russell 2000 rose 5.6% over the week whereas the S&P 500 rose 3.1%. On a year to date basis, Small Cap stocks have outperformed Large Cap stocks (23.9% vs. 12.9%). Value stocks outperformed Growth stocks last week (3.3% vs. 2.9%) as measured by MSCI USA indices. On a year to date basis, Value stocks have outperformed Growth stocks, returning (17.4% vs. 7.8%).

Bonds

  • 10 year US Treasury yields rose by 8bps to 2.47% and the 30 year US Treasury yield rose by 9bps to 3.15% over the week, as markets anticipated an interest rate hike by the US Federal Reserve on 14 December.
  • 20 year TIPS yields rose by 5bps to 0.74% over the week. 20 year Breakeven rose by 4bps to 1.88%.
  • Credit spreads fell over the week as investors’ risk appetite for high yielding assets picked up. Barclays Capital Long Credit Index spread over treasury yields fell by 4bps to 175bps and the Merrill Lynch US Corporate Index fell by 2bps to 133bps over the week. The US high yield bond spread over US treasury yields ended the week 36bps lower at 428bps. The spread of USD denominated EM debt over US treasury yields finished the week 22bps lower at 344bps.

Commodities

  • The S&P GSCI commodity index rose by 0.6% in USD terms over the week. The energy sector remained flat despite the price of WTI crude oil falling 0.4% to USD 52/BBL. Industrial metals rose 1.5% as copper prices increased by 1.1% to $5,822/MT. Agricultural prices rose 1.3% while the gold price fell by 1.0% to $1,163/ounce.

Currencies

  • The US dollar appreciated against all the major currencies. The US dollar appreciated by 0.7% against sterling, ending the week at $1.26/£. US dollar strengthened 1.2% against the euro, finishing the week at $1.05/€. The Japanese yen depreciated by 1.2% against the US dollar, ending the week at ¥115.19/$.
ECONOMIC RELEASES
  • US consumer sentiment surged to 98.0 from 93.8 as consumers equated a Donald Trump presidency with policies that would provide a boost for economic growth. Building on from last week's positive jobs report, labour productivity rose for the first time in three quarters. The Institute of Supply Management's Non-Manufacturing Purchasing Managers' Index (PMI) outperformed expectations as the index jumped from 54.8 to 57.2 in November. However, the US trade deficit widened to a four month high in October on the back of a strong dollar, growing to $42.6bn from $36.2bn.
  • Economic data released in the Eurozone was worse than expected but remained broadly positive. The final Markit Eurozone Composite PMI was revised down to 53.9 from the initial estimate of 54.1, but remains well in expansionary territory. Investor confidence fell short of expectations, as the Sentix investor confidence index dropped to 10.0 from 13.1. However, there were signs of a healthier consumer, as retail sales rebounded from two months of decline; the 1.1% increase in October was above forecasts of a 0.8% increase. German factory orders also increased 4.9% in October on the back of strong demand for investment goods, which was above expectations of a 0.6% increase.
  • Japanese economic data was mixed last week. Economic growth was sharply revised down to 1.3% from 2.2% (quarter-on-quarter, annualized) in Q3 2016, dragged down by a contraction in business spending. Deflationary concerns continued as the GDP deflator was down 0.2% over the third quarter, more than the consensus estimate of a 0.1% decline. However, the Japanese service sector performed well as the Nikkei Japan Services PMI rose to 51.8 in November from 50.5, driven by the opening of new stores. The adjusted current account balance rose to ¥1,929 billion in October from ¥1,477 billion, despite a narrowing of the trade surplus, which fell to ¥588 billion from ¥642 billion.
  • Economic releases in China this week pointed to more stability for the world's second largest economy. After months of decline, exports in the year to November edged up 0.1% outperforming predictions of another sharp fall of 5.0%. Imports also grew by a better than expected 6.7%, compared against a 1.7% predicted drop. Soaring coal and steel prices led to producer prices in China increasing at the fastest rate in five years. The 3.3% increase in producer prices extends recent inflation after years of producer price deflation. 
Sources: 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. Use of, or reliance upon any information in this post is at your sole discretion. It should not be construed as legal, tax or investment advice. Please consult with your independent professional for any such advice. The information contained within this blog is given as of the date indicated and does not intend to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information since the date of publication, or any obligation to update or provide amendments after the original publication date. The blog content is intended for professional investors only.


Share:Add to Twitter Add to Facebook Add to LinkedIn   Print