Connacht finished 2015 in great form, a great underdog story, they had just beaten Munster in Thomond Park for the first time in nearly 30 years, Top of the Pro 12 and their pool in Europe, 2016 couldn’t come soon enough.
But the wheel s have come off the wagon early with five straight defeats in a row. This was definitely not part of the script for 2016. Much like Connacht’s turn of form equity markets have suffered a similar fate. Positive return’s over the course of 2015 have been almost washed away in the first two weeks of the year with markets recording their worst start to a calendar year in living memory.
Even the most pessimistic of forecaster could hardly have foreseen the slump. The UK’s FTSE 100 Index fell to its lowest point since 2012. Markets came under pressure again as a combination of concerns over Chinese economic growth and steeply falling oil prices fuelled a further escalation of risk aversion . China has been the instigator behind most of the distress in markets of late. Whilst the currency has now stabilised the stock market has had two weeks of free fall. There have been some sentiments that the worst of the damage has now been done with the latest trade data indicating that the domestic economy is stronger than expected.

The global index fell by 3.0% following the previous week’s decline of 6.4%. Technically, the Index fell to 10% below its critical 200-day moving average and is now close to 17% off the all-time high set on 15th April 2015. The US S&P 500 Index peaked on 21st May 2015 and is off 11.8% from its all-time-high. All of the major equity markets were down in local currency terms last week ranging from minus 1.8% in the UK to minus 4.6% in Hong Kong. The influential US market was off 2.2%. Defensive stocks, such as utilities and consumer staples, significantly outperformed economically sensitive stocks, such as materials and financials, over the week.

Eurozone bond prices in general rose by 0.4% last week, reacting to the turmoil in equity markets and concerns about global growth, and are up by 1.1% in the first two weeks of the year. The German 10-year bond yield rose from 0.51% to 0.54% last week. Equivalent US yields fell from 2.12% to 2.03%. Irish 10- year bond yields fell from 1.01% to .99% this week.

Commodities and Currencies

Commodity prices continued their long term trend, falling heavily. Overall prices were down by 5.1% last week and are down by 9.2% year-to-date
Oil is the big story of the moment. The price of a barrel of oil has fallen to $30 for the first time since 2003. Expectations are for this to creep lower, it is looking more likely that a litre of diesel at the pumps will fall under a euro.
This is obviously great news for the consumer but not so much for the companies involved. BHP Billiton, the mining to oil giant, announced it was writing down the value of its US shale oil assets by about $5 billion. The softening of sanctions against Iran will see a further increase in supply which will push prices lower.

A week in the markets
Markets January 16

Source: Bloomberg. Capital returns in local currency for the week to Friday 15 January 2016

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