November 2016

• Global markets were broadly positive in November 2016 as the US presidential election result triggered a sharp shift in expectations around fiscal policy, inflation and growth.
• Equities rallied strongly in the United States on expectations of tax cuts, infrastructure spending and deregulation.
• Bond yields rose significantly as investors priced in higher inflation and faster U.S. monetary tightening.
• Emerging markets initially sold off on dollar strength but later stabilised as risk appetite recovered.
• Commodities were volatile, with oil supported by OPEC production cut commitments announced earlier in the autumn.
• European and Japanese equities lagged the U.S. but still posted modest gains amid global reflation expectations.

Asia (ex. Japan)

Asian markets outside Japan experienced a volatile November as investors reacted to the unexpected outcome of the U.S. presidential election. Initial risk aversion led to currency depreciation across several emerging Asian economies, but sentiment gradually stabilised as expectations of U.S. fiscal stimulus improved global growth prospects.

China remained relatively stable, supported by continued policy management and liquidity provision aimed at preventing financial tightening. Elsewhere in the region, export-oriented economies such as South Korea and Taiwan initially came under pressure from dollar strength but later recovered as global technology demand remained resilient. India experienced modest volatility but maintained relative stability due to strong domestic fundamentals.

Europe

European equities delivered modest gains in November despite initial volatility following the U.S. election result. Markets ultimately benefited from rising expectations of global reflation and the potential for stronger external demand.

However, political uncertainty within Europe, including concerns around upcoming elections and banking sector fragility, limited upside. The European Central Bank maintained its accommodative stance, while sovereign bond yields rose in line with global trends as inflation expectations increased.

United States

U.S. equities surged in November as investors priced in the prospect of significant fiscal stimulus under the incoming administration. Financials, industrials and cyclical sectors led gains, while defensive sectors lagged as bond yields rose sharply.

The Federal Reserve signalled increasing confidence in the economic outlook, and market expectations for a December rate hike were reinforced. Treasury yields rose significantly, reflecting expectations of higher inflation, stronger growth and faster policy normalisation.

United Kingdom

UK equities advanced in November, supported by improving global sentiment following the U.S. election result and continued weakness in sterling. Exporters benefited from currency depreciation, while domestic sectors showed more mixed performance.

The Bank of England maintained its accommodative stance following post-Brexit stimulus measures earlier in the year. Inflation expectations rose modestly due to currency effects, while gilt yields moved higher in line with global bond markets.

Japan

Japanese equities rose in November as the yen weakened significantly following the U.S. election result, improving the outlook for exporters. Expectations of stronger global growth and reflationary policies also supported sentiment.

The Bank of Japan maintained its yield curve control policy, helping to stabilise financial conditions. However, domestic inflation remained subdued, and investors continued to anticipate further policy support if needed.

Emerging Markets

Emerging markets experienced a sharp but temporary sell-off following the U.S. election due to concerns over trade policy and dollar strength. However, sentiment stabilised as investors reassessed the potential benefits of stronger U.S. fiscal stimulus.

Commodity exporters initially benefited from stronger oil prices, while Asia remained relatively resilient compared with Latin America. China continued to provide policy support to maintain growth stability, helping to limit broader regional downside.

Commodities

Commodity markets were volatile in November but generally held firm. Oil prices were supported by continued expectations of OPEC production cuts, while industrial metals rose on improving global growth expectations.

Gold prices declined following the U.S. election as rising bond yields and a stronger dollar reduced safe-haven demand. Overall, commodities increasingly reflected expectations of a global reflationary environment.