ETFS Multi-Asset Weekly A Turbulent Week for Investors
Download the complete report (.pdf)
Highlights
Grains continue to gain on weather disruptions in the US.
Global equities see violent gyrations.
Risk or inflation the driver for Japanese Yen (JPY)?
Global stocks and oil faced a particularly volatile week as investors digested weaker-than-expected data. The S&P 500 fell 3.4% in the week up to the Thursday 16th, while Brent crude oil fell 6.2% over the same time period. However, on Friday we started to see a partial recovery. The S&P 500 rose 1.2% and Brent gained 2.0% in just one day as central bank statements from James Bullard (US Federal Reserve) and Andrew Haldane (UK Bank of England) put forward the case to keep unconventional, loose monetary policy in place for longer.
Commodities
Grains continue to gain on weather disruptions in the US. Following the previous week’s rise on the back of stellar corn export numbers, rain disrupted the harvesting of grains in the US, leading to further gains. Wheat rose 4.8%, corn gained 2.2% and soybeans increased 2.6%. However, reports of improved weather are likely to cap these gains. Palladium fell 8.2%, dragged lower by the disappointing euro area industrial production and general capitulation in sentiment last week. Nickel, zinc and tin were also casualties of the same phenomenon, falling 7.3%, 5.1% and 4.7% respectively. Brent crude oil fell 6.2%, before staging a partial recovery on Friday. Gold rose 0.9%, as the metal maintained its position as the first port of call in times of turbulence. Futures market net speculative positioning in gold rose for the first time since August 2014
Equities
Global equities see violent gyrations. Developed market equities reacted excessively negatively to weaker-than-expected economic data before staging a partial recovery on Friday. The Euro STOXX® Investible Volatility Index jumped 13.9% in just one week. One catalyst to the change in sentiment on Friday was comments from James Bullard, the previously hawkish president of the St Louis Fed, pushing for a delay in ending the asset purchase programme. The FTSE MIB declined 6.7% and the DAX fell 4.7% on the disappointing industrial production data in the euro area. European bourses were weighed down by animosity between euro area members following Greece’s plans to exit its rescue programme early. Not even Chinese equities were immune from the capitulation, with China A-shares declining 1.5% on the back of weak loan growth and inflation data.
Currencies
Risk or inflation the driver for Japanese Yen (JPY)? The unwinding of global risk-on positions last week prompted a JPY rally, but we expect this will be short-lived. Positioning in JPY remains severely negative and last week’s rebound is likely to come unstuck in the near-term as investor fears fade. The minutes of the Bank of England (BoE) meeting will be the main focus for Sterling investors this week. Last month two policymakers surprised the market by voting for a rate hike (7 voted for the status quo). The market has been pushing back expectations for a rate hike from Q2 to Q3 and we expect this trend to continue. A less hawkish Board meeting will likely see the downtrend for Sterling remain in place. After last week’s oil price plunge and subsequent partial recovery, we believe that oil prices will now stabilise, removing the downward pressure on the Canadian dollar and Norwegian Krone.
For more information contact:
ETF Securities Research team
ETF Securities (UK) Limited
T +44 (0) 207 448 4336
E info@etfsecurities.com
Important Information
General
This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).
Investments may go up or down in value and you may lose some or all of the amount invested. Past performance is not necessarily a guide to future performance. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.
The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.
This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective, officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.
ETFS UK is required by the FSA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction. No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek your own independent legal, investment and tax or other advice as you see fit.
This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.
Other than as set out above, investors may contact ETFS UK at +44 (0)20 7448 4330 or at retail@etfsecurities.com to obtain copies of prospectuses and related regulatory documentation, including annual reports. Other than as separately indicated, this communication is being made on a ”private placement” basis and is intended solely for the professional / institutional recipient to which it is delivered.
Third Parties
Securities issued by each of the Issuers are direct, limited recourse obligations of the relevant Issuer alone and are not obligations of or guaranteed by any of UBS AG, Merrill Lynch Commodities Inc. (”MLCI”), Bank of America Corporation (”BAC) or any of their affiliates. UBS AG, MLCI and BAC, Shell Trading Switzerland, Shell Treasury, HSBC Bank USA N.A., JP Morgan Chase Bank, N.A., Deutsche Bank AG any of their affiliates or anyone else or any of their affiliates. Each of UBS AG, Merrill Lynch Commodities Inc. (”MLCI”), Bank of America Corporation (”BAC) or any of their affiliates. UBS AG, MLCI and BAC, Shell Trading Switzerland, Shell Treasury, HSBC Bank USA N.A., JP Morgan Chase Bank, N.A. and Deutsche Bank AG disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might have in respect of this document or its contents otherwise arising in connection herewith.
”Dow Jones,” ”UBS”, DJ-UBS CISM,”, ”DJ-UBS CI-F3SM,” and any related indices or sub-indices are service marks of Dow Jones Trademark Holdings LLC (”Dow Jones”), CME Group Index Services LLC (”CME Indexes”), UBS AG (”UBS”) or UBS Securities LLC (”UBS Securities”), as the case may be, and have been licensed for use by the Issuer. The securities issued by CSL although based on components of the Dow Jones UBS Commodity Index 3 month ForwardSM are not sponsored, endorsed, sold or promoted by Dow Jones, CME Indexes, UBS, UBS Securities or any of their respective subsidiaries or affiliates, and none of Dow Jones, CME Indexes, UBS, UBS Securities, or any of their respective subsidiaries or affiliates, makes any representation regarding the advisability of investing in such product.