Weekly market review
Week ending 9 December 2016
Italy’s ‘no’ vote in their referendum inflicted less damage than investors anticipated and the relief, combined with an extension of the European Central Bank (ECB) stimulus programme to continue buying government bonds, led to the Euro Stoxx 600 index finishing up 4.7% for the week. The UK stock market also notched up five consecutive days of gains, experiencing its best week since July 2016. US equities continued their post-election rally, with the US stock market rising 3.1% over the week. In Asia, the Chinese stock market edged higher after the launch of the new Hong Kong-Shenzhen Stock Connect, which makes previously inaccessible shares available to mainland Chinese investors.
UK 10-year government bonds witnessed a heavy sell-off on Friday as the Bank of England (BoE) raised its expectations for inflation and interest rates in its latest inflation survey. The ECB’s decision to continue buying government bonds also contributed to an increase in yields, with the 10-Year German Bund increasing to 0.37%. US 10-Year Treasury yields climbed higher as markets continue to price in an expected hike in interest rates by the Federal Reserve (Fed). The Japanese 10-year treasury yield rose to its highest level since June 2015 due to a sharp bond sell-off.
Due to a mixture of continued Brexit fears and poor UK manufacturing data, the pound fell against the US dollar last week. The Euro pulled back from its early-week gains following the ECB’s decision to trim asset purchases, ending the week down 1%. After the ECB announcement, the euro saw its biggest one-day percentage drop against the US dollar since June.
West Texas Intermediate crude oil finished the week flat after a report showed that crude supplies at the US storage hub in Cushing, Oklahoma climbed the most since 2009 (up 3.8 million barrels). OPEC’s surprise November 30 production cut now seems likely to return to investor focus as members assembled with other major producers to discuss this past week.
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Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.