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Aon Retirement and Investment Blog

Weekly Update - 14 March 2016


  • Radar. Provides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. March 3rd and March 10th issues are available. A French version is also available. 


  • Pension Annuity Settlement Webinar. Please join us on March 22nd 12-1pm CST for a US-hosted webinar featuring a panel of industry experts that will share insights regarding navigating the complexity of these transactions. 
MARKET MOVES (as of March 11, 2016)
  • Global equities finished the week higher supported by Eurozone monetary easing towards the end of the week and rising oil prices. A surge in crude oil prices, following comments from the International Energy Agency (IEA) that oil prices may have bottomed out, pushed equities into positive territory. The MSCI World Index and S&P 500 both rose 1.2% over the week. On a year to date basis, MSCI World Index has underperformed S&P 500 (-1.7% vs. -0.6%).
  • US Small Cap stocks underperformed Large Cap stocks as the Russell 2000 rose 0.6% over the week compared to 1.2% returned by S&P 500. On a year to date basis Small Cap stocks have underperformed Large Cap stocks (-4.0% vs. -0.6%). Value stocks outperformed the Growth stocks last week (1.5% vs. 0.8%) as measured by MSCI USA indices. Growth stocks have underperformed Value stocks, returning (-2.9% vs. 0.9%) on a year to date basis.
  • 10 year US Treasury yields rose by 11bps to 1.98% over the week and 30 year US Treasury yields ended the week 6bps higher at 2.75%.
  • 20 year TIPS yields rose by 9bps to 0.76% over the week. 20 year Breakeven were 1bp lower at 1.42%.
  • Credit spreads tightened over the week as investor flows supported riskier assets. The Barclays Capital Long Credit Index spread over treasury yields fell by 13bps to 233bps and the Merrill Lynch US Corporate Index spread ended the week 10bps lower at 185bps. The US high yield bond spread over US treasury yields was 26bps lower at 682bps and the spread of USD denominated EM debt over US treasury yields finished the week 14bps lower at 410bps.
  • The S&P GSCI Index rose by 3.7% in USD terms over the week due to strengthening crude oil prices. The energy sector rose by 6.2% as the price of Brent crude oil rose by 6.0% to $41/BBL and WTI crude oil rose by 7.2% to finish the week at $39/BBL. Industrial metals prices fell by 1.7% over the week as copper prices decreased by 1.0% to $4,987/MT. Agricultural prices were 2.2% higher while gold prices fell by 1.0%, finishing the week at $1,258/ounce.
  • The US dollar depreciated against major currencies over the week. The US dollar fell 1.3% against sterling, ending the week at $1.44/£. The US dollar weakened 1.4% against the euro finishing the week at $1.12/€. The Japanese yen strengthened 0.3% against the US dollar ending the week at ¥113.52/$.
  • US economic data was fairly disappointing. The NFIB Small Business Optimism index fell to 92.9 in February from 93.9 when the consensus was looking for a small rise to 94.0. The Labour Market Conditions index fell by 2.4 in February, which disappointed the consensus expectation of a 1.0 rise. Wholesale inventories rose by 0.3% over January but trade sales fell by 1.3% over the same period. Both were expected to fall by 0.3%. In slightly better news, households’ net worth gained $1.6tn in the fourth quarter of 2015, helped by rising equity and house prices over the period. This gain more than offset Q3’s $1.3tn loss. Lastly, import prices fell by 6.1% over the twelve months to February, continuing to reflect the US dollar’s rise and low oil price.
  • The European Central Bank loosened monetary policy at their meeting this week. They cut the refinancing rate from 0.05% to 0%, moved the deposit rate further into negative territory reducing the rate by 10bps to -0.4%, and simultaneously increased the quantitative easing programme from €60bn to €80bn per month. The second estimate of fourth quarter Eurozone GDP growth confirmed that the economy grew by 0.3% over the three months, but annual growth was revised up marginally from 1.5% to 1.6%. The Sentix investor confidence index disappointed and fell by 0.5 to 5.5 despite analysts predicting a rise to 8.3. This is despite strong industrial production and factory orders growth in Germany over January.
  • Japanese data flow was generally weak. Q4 GDP was revised marginally upwards (to -1.1% quarter-on-quarter annualized) as business spending grew by more than first thought. The adjusted current account surplus for January was weaker than expected (¥1,492bn actual vs ¥1,655bn expected) but the trade deficit was also lower than expected, at ¥411bn. The February economic watchers survey continued to be pessimistic; both the current conditions and outlook components (44.6 and 48.2 respectively) were below consensus expectations. The consumer confidence index fell to a one year low of 40.1 in February.
  • Chinese economic data was mixed. Exports fell by a surprisingly large 20.6% in yuan terms over the twelve months to February when analysts had expected a 11.3% fall. Imports also fell by 8.0% but the fall was smaller than anticipated. These flows led to a smaller than expected trade surplus of CNY210bn. CPI inflation rose to 2.3% in February when analysts had expected inflation to remain at 1.8%. Finally, both new yuan loans and aggregate financing fell substantially in February from January levels and disappointed versus consensus. 

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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