January 2017

• Global markets began 2017 strongly as optimism surrounding global growth, corporate earnings and reflationary policies supported investor sentiment.
• U.S. equities continued their post-election rally, while European and Japanese markets benefited from improving manufacturing activity and supportive monetary policy.
• Emerging markets rebounded as fears surrounding U.S. protectionism eased slightly and commodity prices remained stable.
• Central banks maintained accommodative stances, though the Federal Reserve continued to prepare markets for gradual policy tightening.
• Oil prices remained supported by OPEC production cuts and expectations of improving global demand.
• Bond yields stabilised after sharp increases in late 2016, helping calm financial markets.

Asia (ex. Japan)

Asian markets outside Japan delivered strong gains in January as improving global trade expectations and stable commodity prices supported investor confidence. Chinese authorities continued to carefully manage liquidity conditions while maintaining economic stability ahead of important political events later in the year.

India recovered from concerns surrounding demonetisation as investors focused on long-term reform potential and improving economic resilience. South Korea and Taiwan benefited from strengthening technology demand and improving export conditions, helping regional equities advance.

Europe

European equities advanced during January as economic indicators continued to improve across the eurozone. Manufacturing and business confidence surveys strengthened, while the European Central Bank maintained its highly accommodative policy stance.

Political risks remained a focus due to upcoming elections in France and the Netherlands, though markets were reassured by improving growth momentum and stronger corporate earnings. The euro remained relatively stable while sovereign bond yields fluctuated modestly.

United States

U.S. equities continued to reach new highs in January as investors anticipated corporate tax reform, deregulation and infrastructure spending under the new administration. Economic data remained supportive, particularly within employment and consumer sectors.

The Federal Reserve left interest rates unchanged but maintained expectations for gradual tightening later in the year. Treasury yields stabilised after late-2016 volatility, while corporate earnings generally exceeded expectations.

United Kingdom

UK equities delivered positive returns in January as sterling weakness continued to support multinational exporters and commodity-related sectors. Domestic economic data remained surprisingly resilient despite Brexit-related uncertainty.

The Bank of England maintained its accommodative stance while monitoring rising inflation driven by currency depreciation. Gilt yields remained relatively stable, and consumer spending continued to support growth.

Japan

Japanese equities advanced as a weaker yen and stronger global trade expectations supported exporters. Manufacturing activity improved, while investor confidence benefited from continued monetary accommodation from the Bank of Japan.

The Bank of Japan maintained yield curve control and asset purchases, reinforcing supportive financial conditions. Corporate earnings expectations improved alongside strengthening global demand conditions.

Emerging Markets

Emerging markets performed strongly in January as investor sentiment improved following concerns over U.S. policy changes late in 2016. Stable commodity prices and recovering capital flows supported equities and currencies.

Commodity-exporting nations benefited from stronger energy and metals prices, while Asian economies remained resilient due to improving export demand and supportive domestic conditions.

Commodities

Commodity prices remained firm in January as OPEC production cuts supported oil markets and global growth expectations improved. Crude oil traded within a stable range as investors monitored compliance with agreed supply reductions.

Industrial metals advanced further due to improving manufacturing sentiment and infrastructure expectations, while gold prices rebounded modestly as political uncertainty and dollar consolidation supported safe-haven demand.