January 2015

• Global markets began 2015 with significant volatility as falling oil prices, deflation concerns and diverging central bank policies shaped investor sentiment.
• The European Central Bank announced a landmark quantitative easing programme, providing a strong boost to European equities and sovereign bond markets.
• The Swiss National Bank shocked investors by abandoning its euro exchange rate cap, highlighting strains created by global monetary policy divergence.
• The United States delivered mixed equity performance as strong economic data was offset by concerns about earnings in the energy sector.
• Japan and Europe benefited from aggressive monetary stimulus, while emerging markets experienced varied results depending on commodity exposure and domestic reform progress.
• Commodity prices remained under pressure, with crude oil falling to multi-year lows before stabilising toward month-end.

Asia (ex. Japan)

Asian markets outside Japan produced mixed returns during January as investors responded to weaker commodity prices, slowing Chinese growth and a stronger U.S. dollar. Chinese equities advanced as authorities introduced additional targeted stimulus measures, including reductions in reserve requirements for selected institutions and further support for infrastructure investment.

India remained one of the stronger regional performers, benefiting from declining inflation, lower oil prices and optimism surrounding structural reforms. Other Asian economies, particularly energy importers such as South Korea and Thailand, welcomed lower fuel costs, although export-oriented sectors remained cautious in light of subdued global demand.

Europe

European markets rallied strongly in January after the European Central Bank unveiled a €60 billion per month asset purchase programme scheduled to continue until at least September 2016. The announcement exceeded market expectations and was widely viewed as a decisive step toward combating deflation and stimulating growth.

Government bond yields fell to record lows across much of the eurozone, while the euro weakened substantially against major currencies. Political developments in Greece added uncertainty after the election victory of the anti-austerity Syriza party, but investors remained focused on the powerful liquidity support provided by the ECB.

United States

U.S. equities delivered mixed results in January as investors weighed robust domestic economic fundamentals against lower corporate earnings expectations in the energy sector. Employment growth remained strong, consumer spending was supported by cheaper gasoline and manufacturing activity continued to expand, albeit at a slower pace.

The Federal Reserve maintained a patient approach toward future interest rate increases, emphasising subdued inflation and international economic risks. Treasury yields declined as global investors sought safety and as lower inflation expectations reduced pressure for imminent tightening.

United Kingdom

UK markets were broadly stable in January, supported by lower inflation and resilient economic growth. Falling oil prices pushed headline inflation close to zero, reinforcing expectations that the Bank of England would delay interest rate increases despite continued strength in the labour market.

Sterling weakened modestly as investors adjusted monetary policy expectations. Consumer-focused sectors benefited from improved household purchasing power, while the energy sector remained under pressure. Gilt yields declined in line with global bond markets as investors responded to widespread monetary easing and low inflation.

Japan

Japanese equities advanced in January, supported by the Bank of Japan's aggressive stimulus programme and a weaker yen. Exporters benefited from improved competitiveness, while corporate earnings continued to show positive momentum. Inflation remained subdued, reinforcing the central bank's commitment to maintaining highly accommodative policy.

Domestic economic indicators gradually improved following the contraction caused by the previous year's consumption tax increase. Investor sentiment was further supported by ongoing pension fund reallocation toward equities and the government's continued emphasis on structural reform and corporate governance enhancements.

Emerging Markets

Emerging markets delivered varied results in January as lower oil prices benefited importing nations while commodity exporters faced mounting pressure. Russia and several Latin American economies struggled with weaker fiscal positions and declining export revenues, whereas India and parts of Asia attracted renewed investor interest.

Capital flows remained sensitive to U.S. monetary policy expectations and currency movements. Countries with credible reform agendas and manageable external balances generally outperformed, while those dependent on commodity exports or facing political uncertainty continued to lag.

Commodities

Commodity markets remained weak in January, with crude oil prices falling to fresh multi-year lows before recovering modestly late in the month. Oversupply, resilient U.S. shale production and OPEC's commitment to maintaining output continued to dominate the outlook for energy markets.

Gold prices strengthened as investors sought safe-haven assets amid market volatility and uncertainty surrounding global growth. Industrial metals were mixed, constrained by concerns over Chinese demand, while agricultural commodities showed varied performance depending on weather conditions and evolving supply forecasts.