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Market Report - December 2016

Market Report

US equities continued to perform well following the US presidential election in November, while the FOMC voted unanimously to raise interest rates by 25bps to a range of 0.50% to 0.75%. The S&P 500 index added 1.82% while the MSCI World gained 2.39%.  The Dow Jones index advanced 3.34% while the Nasdaq Composite and Russell 2000 indices increased by 1.12% and 2.63%, respectively.

In Europe, the ECB stated it would be increasing the duration of its quantitative easing programme until December 2017 while reducing its bond purchases from €80bn a month to €60bn a month.  The Eurostoxx 50 gained 7.83% while the CAC 40 added 6.20% and the DAX increased by 7.90%.  In the UK, the FTSE 100 added 5.29%, while cable continued to weaken following the Prime Minister’s continued rhetoric of seeking a “hard Brexit”. 

In Asia, the Shanghai Composite declined by 4.50% and the Hang Seng index fell by 3.46%.  In Japan, the Nikkei added a further 4.40%.

Commodities saw WTI and Brent crude rise further as OPEC agreed with non-OPEC states to cut production.  WTI and Brent crude gained 8.66% and 12.58% to end the year up 45.03% and 52.41%, respectively.  Natural gas gained 11.10%.  Gold declined a further 1.79% while silver fell by 3.68%.  Copper dropped 4.97% following strong gains in November.  The S&P GSCI index increased a further 4.72%.

Global bond markets were not immune to all the political events running up towards the end of the quarter.  Government bond yields increased and yield curves also steepened largely due to the Trump win, as well as the uncertainty surrounding the UK’s Brexit negotiations.   Six month treasury yields gained 5 bps to 0.62%, while two and five year yields added 8 bps and 9 bps ending at 1.19% and 1.93%, respectively.  The longer dated ten and thirty year yields increased by 6 bps and 3 bps to 2.44% and 3.07%. 

German 10 year yields decreased by 7 bps to 0.21% while French 10 year yields fell by 7 bps to 0.69%.  Spanish and Italian 10 year yields fell by 17 bps a piece to end the month at 1.38% and 1.82%, respectively.