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Aon Retirement and Investment Blog

Weekly Update -28 July 2015 (APAC)

UPCOMING EVENTS

  • Global benefits governance continues to be an important issue for multinationals since Aon Hewitt conducted the first study with American Benefits Council in 2012. We had almost 200 multinationals participate then. Please consider participating in the 2015 version, which is designed to understand the evolving trends in global governance over the past 3 years. It also includes an in-depth analysis of operating models companies use to manage global benefit programs. You will receive a copy of the global report as well as a customized benchmark report comparing your responses to global results.
NEW INTELLECTUAL CAPITAL
  • Annuity Pricing Update at 6/30/2015.  Monthly update for pricing of annuity purchases. 
  • Radar: Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health.
MARKET MOVES 
Equities:
  • Global equity markets fell across all regions over the week, driven by weaker than expected quarterly corporate earnings reports and falling commodity prices. Chinese manufacturing activity contracted in July, deepening the worries about the health of the Chinese economy and commodity demand .The MSCI World Index fell 2.0%, but outperformed the S&P 500 which fell 2.2%. On a year to date basis MSCI world index has outperformed the S&P 500 (+3.6% vs. +2.1%).
  • US small cap stocks underperformed large cap stocks as the Russell 2000 fell 3.2% over the week. However on a year to date basis, small cap stocks have outperformed large cap stocks (2.5% vs. 2.1%). Growth stocks returns fell less compared to value stocks last week (-1.9% vs. -2.5%) as measured by MSCI USA indices. Growth stocks have outperformed value stocks, returning 6.6% vs.-1.5% on a year to date basis.
Bonds:
  • 10 year US treasury yields fell by 9 bps to 2.26% over the week and 30 year US treasury yields finished the week 12 bps lower at 2.96%.
  • 20 year TIPS yield ended the week 6 bps lower at 0.73%. 20 year breakevens were 6 bps lower at 1.75%.
  • Corporate credit spread widened over the week. The Barclays Capital Long Credit Index spread over treasury yields moved up by 5 bps to 211 bps and the Merrill Lynch US Corporate Index spread finished the week 4 bps higher at 154 bps. The US high yield bond spread over US treasuries was 37 bps higher at 532 bps hitting its highest level since January. The spread of USD denominated EM debt over US yields finished the week 15 bps higher at 365 bps. 
Commodities:
  • The S&P GSCI Commodity index fell by 4.5% in USD terms over the week on the back of weaker growth in China and concerns over a supply glut. The energy sector fell by 4.5% as the price of WTI crude oil fell 5.7% to $48/BBL. Industrial metals were 4.0% lower over the week, as copper prices fell 3.9% to $5,247/MT. Agricultural prices were 5.8% lower and gold fell by 4.3% to $1,084/ounce.   
Currencies:
  • The US dollar depreciated by 1.0% against the euro and by 0.2% against the yen, finishing the week at $1.10/€ and ¥123.71/$. However the US dollar appreciated by 0.8% against the sterling to $1.55/£.
Economic Releases
  • The US manufacturing purchasing managers’ index (PMI) climbed a little from 53.6 to a preliminary 53.8 in July. This level is still significantly below the 2014 highs as the stronger dollar and the impact of the lower oil price on the energy sector have been challenging US industry. However, the housing market continues to be strong with existing homes sales rising by 3.2% in June to the highest level since February 2007. New home sales fell by 6.8% (0.3% expected) over the same month but these account for a smaller proportion of the housing market and have risen significantly over the past year.
  • In the Eurozone both manufacturing and services PMI slid in July on a preliminary basis - from 52.5 to 52.2 and from 54.4 to 53.8 respectively, disappointing expectations of little change in both surveys. Consumer confidence also took a hit in July, falling to -7.1 from -5.6.  These figures indicate that the Greek debt negotiations have affected corporate and household sentiment within the Eurozone and are likely to act as a drag on the economy. German PMI figures were more stable but both PMI figures dropped a little.
  • Japanese economic data was largely positive. Exports rose at their fastest pace for 5 months in June at an annual 9.5%, but were still behind economist estimates of a 10.0% rise as the Chinese slowdown impacted negatively.  Imports decreased over the 12 months to June by 2.4%, less than the expected 4.3% decline. Japanese supermarket sales continued to rise, up 0.3% over the twelve months to June.  July's provisional manufacturing PMI also came in above expectations, at 51.4, much higher than the previous month's 50.1.  Finally, Japanese machine tool orders for the year to June were up 6.6%.
  • In China, manufacturing PMI fell further below the key 50 level at 48.2 in July, down from 49.4 in June and defying expectations for a move back towards 50. Export orders were weak although policy easing steps supported domestic demand.

Source: Aon Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Datastream

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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