Ireland

Irish house prices fell by 1.3% in January and by 2.1% in Dublin – the sharpest declines since 2012. These falls are not too surprising. MyHome.ie reported asking prices on new instructions to sell declining by 2.3% in Q4. There are several explanations for weaker price trends. First, the end of capital gains tax exemptions led to a pick-up in transactions in 2014, which may now fall back. That said, transactions in January 2015 were still up 50% on 2014 levels. Second, uncertainty surrounding new Central Bank rules on mortgage lending may have restrained expectations of future price growth.

Data released this week show that the Irish manufacturing PMI rose during the month of February. This would suggest that output is now expanding at its strongest pace since 1999. The PMI survey also indicated that job creation in the sector in February was at its joint fastest pace on record. Manufacturing firms indicated that both domestic and foreign orders were sustaining activity – particularly from the UK.

These figures were reinforced by the news of and expansion in Irish retail sales by 3.3% in January, which are up 8.8% on the year. The pick-up in retail spending was largely driven by car sales, up 19.8% on the year previous. Nonetheless, even excluding motor trades, retail sales saw annual growth of 4.8% on the year – albeit down slightly on the month by 0.1%.

Irish labour market data provided further good news. Employment rose by 0.5% on the quarter, up 1.5% on the year. Private sector employment grew by 3.2% in the year to Q4. The unemployment rate was revised down to 10.4% in Q4 and 10.3% in January. The headline seasonally adjusted unemployment rate will probably fall below 10% early in 2015.

Equities

Global equities rose for the fourth week in-a row, reaching a fresh all-time-high on Thursday, and are now approaching the sixth anniversary of the current bull market. European equities have led the way so far this year. As during most of 2014, euro currency weakness has again flattered returns for eurozone investors in 2015. Equities continue to be supported by the expectation of reasonably strong corporate earnings’ growth and low interest rates. In addition, equities remain better value relative to other asset classes despite the rise in price earnings multiples. Markets have been supported by continued loose monetary policy, with quantitative easing (QE) beginning in the Eurozone next Monday, along with better than expected economic data in Europe. A temporary resolution of the Greek crisis has also helped.

Bonds

Eurozone bond prices overall were up by 1.3% last week and are up 4.7% year-to-date. Markets have reacted positively year to-date to the announcement of impending QE. The German 10-year bond yield fell from 0.37% to 0.33%, close to its all-time low of 0.30%. Equivalent US yields fell from 2.11% to 1.99%. Irish 10-year bond yields have fallen to 0.88% down from 1.14%. This is an all-time low for 10 – year bond yields. This is incredible given the fact that the yield in July 2011 was over 12%.

Commodities

Commodity prices in general were down by 1.9% (in dollar terms) last week. Oil prices, which had fallen by 60% from their 2014 highs, have picked up somewhat in February.Oil price volatility remains high. OPEC countries have not cut production, leaving it to the non‐OPEC nations to adjust their output.