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Weekly Update - 08 February 2016

  • RadarProvides a summary of recent regulatory and industry events in Canada affecting talent, retirement, and health. A French version of the prior Radar is now available as well. 
MARKET MOVES (week ending February 5, 2016)
  • Global equities fell over the week after having picked up a little in the last part of January, driven by a move down in oil prices and concern over global growth.
  • The MSCI World Index fell 2.4% over the week outperforming the S&P 500 which fell 3.0%. On a year to date basis, MSCI World Index has underperformed S&P 500 (-8.2% vs. -7.9%).
  • US Small Cap stocks underperformed Large Cap stocks as the Russell 2000 fell 4.8% over the week compared to 3.0% fall by S&P 500. On a year to date basis, Large Cap stocks have outperformed Small Cap stocks (-7.9% vs. -13.2%). Growth stocks underperformed the Value stocks last week (-4.1% vs. -2.2%) as measured by MSCI USA indices. Growth stocks have underperformed Value stocks, returning (-10.2% vs. -6.4%) on a year to date basis.
  • 10 year US Treasury yields fell by 9bps to 1.84% over the week and 30 year US Treasury yields finished the week 8bps lower at 2.67%.
  • 20 year TIPS yield fell by 5bps at 0.78% over the week. 20 year Breakeven were 5bps lower at 1.30%.
  • Credit spreads rose over the week. The Barclays Capital Long Credit Index spread over treasury yields rose by 8bps to 260bps and the Merrill Lynch US Corporate Index spread ended the week 7bps higher at 209bps. The US high yield bond spread over US treasury yields was 36bps higher at 810bps. The spread of USD denominated EM debt over US treasury yields finished the week 10bps higher at 473bps.
  • The S&P GSCI fell by 3.5% in US dollar terms over the week. The energy sector fell by 6.5% as WTI Crude oil fell by 8.3% to US$ 31/BBL over the week as inventory data from the American Petroleum Institute showed a large inventory build-up. Industrial metals prices marginally rose by 0.3% over the week as copper prices increased by 1.4% to $4,633/MT. Agricultural prices were 1.4% lower, while gold prices rose by 3.3%, finishing the week at $1,155/ounce.
  • The US dollar depreciated against the major currencies. The US dollar fell 2.1% against sterling finishing the week at $1.45/£. The US dollar weakened against the euro by 3.0% at $1.11/€. The Japanese yen appreciated by 3.5% against the US dollar at ¥117.02/$.
  • US Labor market data remained broadly encouraging. While nonfarm payrolls only rose by 151,000 over January, less than expected and just over half the previous month’s gain, the unemployment rate finally broke through 5%, falling to 4.9% for the first time since early 2008. This was accompanied by still steady wage growth, with average hourly earnings rising by 2.5% over the year to January, ahead of the 2.2% growth expected. However, overall personal income rose by only 0.3% over 2015, and personal spending was flat over the same period. The PCE core inflation measure, the Federal Reserve’s favored metric of underlying inflationary pressures in the economy remained at 1.4% as expected in December. January’s manufacturing and services purchasing managers’ indices (PMI) were revised down, resulting in the composite index dropping to 53.2, a level last reached in 2013. Lastly, preliminary estimates suggest that Labor productivity fell by 3% over Q4 of last year.
  • The Eurozone composite PMI was upgraded marginally from 53.5 to 53.6. Annual retail sales to December grew 1.4%, marginally behind expectations of 1.5% but November sales were revised up. Finally, unemployment figures were released, with the rate falling 0.1% to 10.4%, a situation mirrored in Germany where the rate fell from 6.3% to 6.2%. Regional unemployment has been slowly falling since 2013, after rising due to the Global Financial and Eurozone crisis.
  • In a light week for Japanese economic data, January’s manufacturing PMI was revised down marginally to 52.3, but the services figure rose to 52.4, causing the composite PMI to increase to 52.6 from its previous reading of 52.2. The consumer confidence index fell to 42.5 from 42.7, meeting consensus expectations.
  • Chinese economic data picked up slightly. The Caixin manufacturing PMI rose slightly to 48.4 in January from 48.2 in December, ahead of consensus expectations, but the services PMI rose considerably to 52.4 in January from 50.2. This move brought the composite PMI above the neutral 50 mark to 50.1 from 49.4. 
Source: Aon Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Datastream. Click here for index descriptions. 

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