February 2016

• Global markets remained highly volatile in February 2016, though sentiment improved slightly as central banks signalled increased willingness to support growth.
• Equities rebounded from January lows but remained sensitive to oil price movements and ongoing concerns about global growth.
• Oil prices stabilised after steep declines, helping to ease some of the financial stress across energy and credit markets.
• China remained a key focus for investors, with continued concerns over growth and capital outflows but reduced panic compared to January.
• Central banks, including the European Central Bank and Bank of Japan, reinforced expectations of further monetary easing.
• Safe-haven demand moderated slightly, though government bonds and gold remained supported.

Asia (ex. Japan)

Asian markets outside Japan experienced a partial recovery in February after the sharp sell-off in January. Sentiment improved as Chinese authorities introduced additional liquidity measures and stepped up efforts to stabilise equity and currency markets. While concerns over structural slowing in China persisted, the intensity of panic-driven selling eased.

Across the region, performance remained mixed. Export-oriented economies such as South Korea and Taiwan benefited from stabilising global risk sentiment, while energy importers continued to gain from lower oil prices. India remained relatively resilient, supported by steady domestic demand and expectations of continued policy easing.

Europe

European equities rebounded modestly in February but remained volatile as investors assessed the implications of renewed global uncertainty and falling interest rates. The European Central Bank indicated it was prepared to expand stimulus further, reinforcing expectations of additional monetary easing in March.

Economic data remained subdued but stable, with inflation still well below target. Financial sector stocks continued to struggle in a low-rate environment, though exporters benefited from a weaker euro. Sovereign bond yields remained at or near historic lows as demand for safe assets persisted.

United States

U.S. equities recovered part of January's losses in February as oil prices stabilised and economic data remained relatively solid. Employment growth continued to be strong, and consumer spending provided a degree of resilience despite financial market volatility.

The Federal Reserve adopted a notably cautious tone, with policymakers expressing concern about global developments and tightening financial conditions. Expectations for further interest rate increases were pushed further into the future, contributing to a decline in Treasury yields.

United Kingdom

UK equities posted modest gains in February as stabilising commodity prices and improving global sentiment helped support mining and energy stocks. Domestic economic conditions remained steady, with low inflation continuing to support real incomes.

The Bank of England maintained its accommodative policy stance amid subdued inflation and global uncertainty. Sterling remained relatively weak against the U.S. dollar, while gilt yields stayed low in line with global bond markets.

Japan

Japanese equities stabilised in February after sharp declines in January, supported by the Bank of Japan's introduction of negative interest rates and expectations of further policy support if needed. However, investor sentiment remained cautious amid yen volatility and global risk aversion.

Exporters benefited from a weaker yen at times, but concerns over global demand limited gains. Domestic economic data remained mixed, with inflation still well below target despite aggressive monetary easing.

Emerging Markets

Emerging markets recovered modestly in February, helped by stabilising commodity prices and reduced panic in global equity markets. However, conditions remained fragile, with capital flows and currency volatility continuing to influence performance.

Commodity exporters remained under pressure despite the rebound, while countries such as India benefited from relatively stable macroeconomic fundamentals. China remained central to sentiment, with policy support helping to prevent further disorderly market declines.

Commodities

Commodity markets stabilised in February after January's severe declines. Crude oil recovered from multi-year lows as expectations grew that production levels might eventually adjust in response to prolonged low prices, although oversupply conditions persisted.

Gold prices remained firm, supported by ongoing uncertainty over global growth and expectations of continued accommodative central bank policy. Industrial metals also stabilised but remained weak due to concerns about Chinese demand and global manufacturing activity.