December 2015

• Global markets ended 2015 on a mixed but generally positive note as the European Central Bank expanded stimulus while the U.S. Federal Reserve delivered its first rate hike in nearly a decade.
• European equities rallied following the ECB's decision to extend quantitative easing, although the scale of the expansion disappointed some investors.
• U.S. markets were relatively stable as the Federal Reserve's rate increase was well-telegraphed and absorbed smoothly by financial markets.
• Japan advanced on continued monetary easing and a weaker yen, while China remained broadly stable following earlier volatility.
• Emerging markets were supported by a stabilisation in commodity prices and a softer U.S. dollar after the initial Fed move.
• Commodity markets were volatile but ended the year with crude oil near multi-year lows amid persistent oversupply.

Asia (ex. Japan)

Asian markets outside Japan delivered mixed but generally stable performance in December as investors reacted to the Federal Reserve's long-anticipated rate increase. While the initial reaction included currency volatility and capital outflow pressures, markets stabilised as the Fed signalled a gradual approach to further tightening.

Chinese equities remained relatively subdued compared with earlier volatility in the year, as policymakers maintained supportive measures to ensure financial stability and controlled growth moderation. Across the region, lower oil prices continued to benefit importing economies such as India, South Korea and Thailand, supporting both inflation trends and household consumption.

Europe

European equities ended the year on a positive note despite initial disappointment that the European Central Bank's expanded quantitative easing programme was smaller than expected. Investors ultimately focused on continued liquidity support and the prospect of sustained low interest rates across the eurozone.

Economic data remained broadly supportive, with gradual improvement in credit conditions and business confidence. However, political uncertainty and lingering concerns about global growth kept volatility elevated, particularly in financial and export-sensitive sectors.

United States

U.S. equities closed 2015 with modest gains as the Federal Reserve raised interest rates for the first time since 2006, marking a significant shift in monetary policy. The move was widely anticipated and accompanied by guidance suggesting a slow and data-dependent tightening cycle.

Economic fundamentals remained solid, with strong employment growth and resilient consumer spending offsetting weakness in energy-related sectors. Treasury yields rose slightly following the Fed's decision, while risk assets remained broadly stable as investors interpreted the tightening cycle as gradual rather than aggressive.

United Kingdom

UK equities finished the year with modest performance as global monetary policy divergence and subdued inflation shaped investor sentiment. Domestic economic conditions remained relatively stable, supported by employment growth and steady consumer demand.

The Bank of England maintained its accommodative stance, with inflation remaining well below target. Sterling traded within a narrow range, while gilt yields moved in line with global bond markets as investors focused on the implications of U.S. tightening and ongoing ECB stimulus.

Japan

Japanese equities ended 2015 positively, supported by continued monetary easing from the Bank of Japan and a weaker yen. Export-oriented companies benefited from improved competitiveness, while corporate governance reforms continued to encourage shareholder-friendly policies.

Despite mixed domestic economic data, investor sentiment remained supported by expectations that policymakers would maintain or potentially expand stimulus if inflation failed to accelerate toward target levels. Pension fund reallocation into equities also remained a key structural support.

Emerging Markets

Emerging markets ended the year on a more stable footing as concerns over China and global growth eased slightly and commodity prices showed signs of bottoming. However, performance remained uneven across regions, reflecting differing exposures to commodities, currencies and domestic policy conditions.

Commodity importers such as India and parts of Southeast Asia continued to outperform relative to Latin America and parts of Eastern Europe. Currency volatility moderated after the initial Fed rate hike, helping restore some investor confidence in selected markets.

Commodities

Commodity markets remained under pressure in December, with crude oil trading near multi-year lows despite intermittent rebounds. Oversupply conditions, particularly in oil, continued to dominate sentiment as markets assessed the impact of weaker demand growth and persistent production from major exporters.

Gold prices were relatively steady as investors balanced the implications of the Federal Reserve's first rate hike with ongoing global uncertainty. Industrial metals remained subdued due to concerns over Chinese demand, while agricultural commodities were mixed depending on seasonal supply dynamics and weather-related disruptions.