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Weekly market review

Week ending 30 December 2016


Equities

Global equity markets rounded out 2016 in positive territory despite several unexpected political events. For the final trading week of the year, the UK stock market rose to 7142, hitting a record high. The US stock market was up 12% for the year, continuing to reflect an upbeat outlook heading into 2017, while Japan’s Topix index closed the year flat at 0.3% as it recovered from early year losses in the latter half of the year.

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Fixed income

UK 10-year government bond yields closed the year at 1.239%, rising towards the end of the year after Brexit brought yields down dramatically. US 10-year Treasury bond yields ended the year at 2.4%, marking its highest level of the year, bouncing up from when yields hit record lows in July. December marked an additional interest rate hike, after the Federal Reserve (Fed) began tightening in 2015. Japan’s 10-year bond traded 0.22% lower for the year, driven by the Bank of Japan’s (BoJ) focus on yield targeting.

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Currencies

The pound fell against the euro as well as a basket of other major currencies due to thin demand for the currency last week and ongoing concerns over Britain’s ability to maintain access to the EU’s single market following the Brexit process. However, it appreciated against the US dollar after a massive sell-off in the currency and a widening of trade deficit left it down 0.9% for the week. Overseas, the People’s Bank of China, which last year began guiding the yuan against a currency basket, said that it would be adding 11 more currencies to the basket, thereby further reducing the US dollar’s weighting. This may help ease downward pressure on the yuan. Japan’s yen rallied in the second half of 2016, appreciating 23% from the year’s low.



Commodities

West Texas Intermediate crude oil ended the week lower after a surprise build-up in US inventories. Nevertheless, crude prices were up 45% for the year, with the OPEC (Organisation of petroleum exporting countries – the intergovernmental organization of oil-exporting developing nations that coordinates and unifies the petroleum policies of its member countries) production cut agreement appearing increasingly intact.

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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.