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Aon Hewitt Retirement and Investment Blog

Weekly Update - 6 November 2017

NEW INTELLECTUAL CAPITAL

MARKET MOVES - Week Ending November 3, 2017
Equities
  • Global equity markets rose over the week supported by encouraging corporate earnings and economic data in major economies. The MSCI World Index rose by 0.6% over the week, outperforming S&P 500 which rose by 0.3% over the same period. On a year to date basis, MSCI World has outperformed S&P 500 (19.3% vs. 17.5%).
  • US Large Cap stocks outperformed Small Cap stocks as the S&P 500 rose by 0.3% whilst Russell 2000 fell 0.9% over the week. On a year to date basis, S&P 500 has outperformed Russell 2000 (17.5% vs. 11.3%). Growth stocks outperformed Value stocks last week (0.7% vs.  -0.1%) as measured by MSCI USA indices. On a year to date basis, Growth stocks have outperformed Value stocks (24.4% vs. 11.1%).
Bonds
  • The 10 year US Treasury yields fell by 7bps to 2.33% and the 30 year US Treasury yields fell by 11bps to 2.81% in a week when Donald Trump nominated Jerome Powell as the next US Federal Reserve chairman. Powell is expected to maintain market-friendly, monetary policy continuity.
  • 20 year TIPS yield fell by 6bps to 0.61% over the week. 20 year Breakeven fell by 3bps to 1.76%.
  • Barclays Capital Long Credit Index spread over treasury yields rose by 3bps to 145bps and Merrill Lynch US Corporate Index rose by 2bps to 102bps over the week.
  • The US high yield bond spread over US treasury yields rose by 8bps to 352bps. The spread of USD denominated EM debt over US treasury yields finished the week 9bps higher at 291bps.
Commodities          
  • The S&P GSCI rose by 0.9% in USD terms over the week. The energy sector rose by 0.8% as the price of WTI crude oil increased by 3.2% to $56/BBL. Industrial metals rose by 1.5% as copper prices increased by 0.9% to $6,865/MT. Agricultural prices rose by 0.1% whilst gold prices fell by 0.1% to $1,268/ounce.  
Currencies
  • The US dollar appreciated against sterling and the yen, but depreciated against the euro. The US dollar appreciated by 0.3% against sterling, ending the week at $1.31/£. US dollar weakened by 0.3% against the euro, finishing the week at $1.16/€. The Japanese yen fell by 0.4% against the US dollar, ending the week at ¥114.26/$.
Economic Releases
  • The US labour market rebounded following a hurricane-hampered September jobs report. Although missing expectations of a 313k increase, the US economy added 261k jobs in October, up from a revised 18k increase in the previous month. The unemployment rate was able to beat expectations and move from 4.2% to 4.1% due to a lower than anticipated participation rate. However, wage growth failed to materialise. Average hourly earnings slowed more than expected to 2.4% in the year to October, down from 2.8% and below consensus estimates of 2.7%. Elsewhere, the manufacturing sector looked to have cooled with the Institute of Supply Management's manufacturing index missing expectations of 59.5 and slipping to 58.7 from 60.8. Consumer confidence was more resilient, as the Conference Board’s measure increased by 5.3 points to 125.9, the highest level in almost seventeen years.
  • The advance reading for Eurozone GDP growth in the year to September 2017 was 2.5%, above the previous reading of 2.3% and the forecasted 2.4% increase. The unemployment rate edged down from 9.0% to 8.9%; the first time the rate has fallen below the 9.0% mark since 2009. There was further positive news as the European Commission’s monthly measure of economic confidence rose to its highest level since January 2001. The index increased to 114.0 from a revised 113.1. Consumer price inflation, however, remained stubbornly below the European Central Bank’s 2.0% target, as it slowed to 1.4% from 1.5% in the year to October. Inflation in Germany similarly failed to meet expectations of 1.7%, slowing to 1.6% from 1.8%.
  • In Japan, the provisional release for industrial production growth showed a decline of 1.1% in September, down from the 2.0% increase seen in August. Both the jobless rate and job-to-applicant ratio remained unchanged at 2.8% and 1.52 respectively in September. The final reading for the Nikkei manufacturing PMI was revised upwards to 52.8 in October from 52.5. Retail sales rose by 2.2% over the year to September (marginally missing the consensus estimate of a 2.3% increase), following revised 1.8% growth in August.
  • The official Chinese manufacturing PMI came in lower at 51.6 from 52.4 and below forecasts of a more modest decrease to 52.0. The non-manufacturing PMI slipped 1.1 point lower to 54.3. However, the two indices suggest that both sectors remain in expansionary territory. The Caixin manufacturing PMI, which focuses more on small and mid-sized businesses, met estimates and was unchanged at 51.0. The services sector accelerated with the non-manufacturing index increasing by 0.6 points to 51.2.
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.


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