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 February 2018


MARKET MOVES (Week ending February 11, 2018)
  • The correction in global equity markets spilled over into a second week with global equities recording one of their worst performing weeks in recent times. Investor concerns continued over rising bond yields on the back of higher inflation and interest rate expectations. Falling energy prices exacerbated the sell-off in equity markets. The MSCI World Index fell 5.5% over the week, underperforming the S&P 500 Index, which fell 5.1% over the same period. On a year-to-date basis, the S&P 500 Index has outperformed the MSCI World Index (-1.8% vs. -2.4%).
  • US Large Cap stocks underperformed Small Cap stocks over the week as the S&P 500 Index fell 5.1% whilst the Russell 2000 Index fell 4.5%. On a year-to-date basis, the S&P 500 Index has outperformed the Russell 2000 Index (-1.8% vs. -3.7%). Value stocks underperformed Growth stocks over the week (-5.2% vs. -5.0%) as measured by MSCI USA Growth and Value Indices. On a year-to-date basis, Growth stocks have outperformed Value stocks (0.0% vs. -3.6%).
  • The 10 year US Treasury yield rose by 1bp to 2.85% and the 30 year US Treasury yield rose by 7bps to 3.16% over the week.
  • The 20 year TIPS yield rose by 8bps to 0.86% while the 20 year breakeven inflation rate fell by 3bps to 2.03%.
  • The spread of the Bloomberg Barclays Capital Long Credit Index over treasury yields rose by 9bps to 134bps and the Bank of America Merrill Lynch US Corporate Index credit spread rose by 7bps to 97bps. The US high yield bond spread over US treasury yields rose by 46bps to 382bps. The spread of USD denominated EM debt over US treasury yields finished the week 33bps higher at 295bps.
  • The S&P GSCI fell by 6.4% in USD terms over the week. The energy sector fell by 9.1% as the price of WTI crude oil fell by 9.6% to US$59/BBL. Industrial metals decreased by 4.0% as copper prices fell by 4.2% to US$6,712/MT. Agricultural prices rose by 0.2% whilst gold prices fell by 1.3% to US$1,313/ounce.
  • The US dollar appreciated against major currencies (except for the yen) over the week. The US dollar appreciated by 2.2% against sterling, ending the week at $1.38/£. The US dollar strengthened by 1.5% against the euro, ending the week at $1.22/€. The Japanese yen appreciated by 1.6% against the US dollar, ending the week at ¥108.69/$.
Economic Releases
  • After decelerating in the last few months of 2017, growth in the US services sector picked up in 2018. The Institute of Supply Management's (ISM) non-manufacturing index surpassed expectations of a modest increase to 56.7, and rose from 56.0 to 59.9; marginally off the highest level on record of 60.1 posted in October last year. The labour market looked to have tightened further with the number of people claiming for unemployment benefits falling to a near-45 year low of 221k. Last week's initial jobless claims came in below the previous reading of 230k and analyst forecasts of 232k. Elsewhere, the US trade deficit grew by more than expected in December, increasing by 5.3% from a revised $50.4bn to $53.1bn; the largest deficit since 2008. The deficit was forecasted to increase to $52.1bn but was thought to have been driven higher by higher prices of commodity imports.
  • Positive economic data continued to emanate from the Eurozone over the week. The flash Eurozone Composite PMI reading for January came in marginally above expectations at 58.8. In Germany, the flash Composite PMI reading for January also came in slightly above expectations at 59.0, up from 58.8 previously. Retail sales in the Eurozone increased by 1.9% in the year to December, in line with analyst forecasts, but down from a 3.9% increase in the year to November. Meanwhile, German factory orders increased by 3.8% in the month of December, above expectations of a 0.7% increase, and reversing a 0.1% decline in the previous month. The Eurozone Sentix investor Confidence index unexpectedly fell to 31.9, down from 32.9, but nonetheless remains at historically high levels. 
  • Japan’s current account surplus narrowed to ¥797.2bn in the year to December from the previous reading of ¥1347.3bn. Wage growth data was mixed, as labour cash earnings grew by 0.7% for the year to December, higher than consensus estimates of 0.5%. However, real wages (which takes inflation into consideration) fell by 0.5%. The Nikkei Japan PMI for services rose to 51.9 in January from 51.1 in December, as domestic demand showed signs of improvement. The Tertiary Industry index moved 0.2% lower in December, below the previous month's reading of 1.1% and expectations of 0.2% growth.
  • Chinese inflation data showed signs of cooling, as both the consumer price index and the producers’ price index came in lower at 1.5% and 4.3% respectively for the year to January. Both measures did, however, meet consensus estimates. Imports and exports improved over the year to January but the trade surplus fell to US$20.34bn from US$54.69bn as the surge in imports (up 36.9% over the year from 4.5%) eclipsed the growth in exports (up 11.1% from 10.9%).
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