Markets have remained buoyant following a tumultuous month with the shocking events in Paris, and  the downing of a Russian jet by Turkey. It is estimated that the attacks in Paris will cost the French economy €2 billion. Russia have implemented a series of economic sanctions against Turkey. No doubt there will be further ripples from this event in the coming weeks.

In the short term there was robust economic sentiment in Europe which has provided a tailwind for markets, helping to offset the negative impact of these events.

Global stock markets quickly recovered their poise and maintained positive returns in the week. Unsurprisingly defence companies generally attracted support following the French governments move to increase their forces engaging Daesh (ISIS) and the likelihood that Britain will also join the bombing campaign in Syria following their parliaments vote on Wednesday.

Optimism that the US economy is strong enough to absorb the interest rate hike that is increasingly seen as a nailed-on certainty for December, seemed to underpin investor sentiment.

Japan’s economy has slipped back into recession. The economy shrank 0.8% in Q3 on an annualised basis, which follows on from a contraction of 0.7% in the second quarter. Stocks markets pushed higher on the back of confidence that the Government and Central bank will provide new stimulus measures.

Ireland

The Irish residential property price index (RPPI) was up 1.6% on the month in October. This means the annual rate of inflation was 7.6% in October. This is the slowest pace of inflation seen since January 2014. However, a slowdown was always likely as exceptionally strong monthly rises recorded in late 2014 fell out of the annual comparison
One feature of the RPPI data is that price rises outside Dublin are now outpacing the capital. The RPPI index excluding Dublin rose by 2.1% on the month and is up 10.7% on the year. Dublin prices rose by a more sedate 1.0% on the month, up just 4.5% on the year. This is the weakest level of inflation in Dublin since June 2013.

Equities

Global equities had a strong week recovering from the previous week’s profit-taking. Markets reacted positively to the expectation of further monetary easing in the eurozone and some stronger economic data in the US. Investors continue to focus on China as well as the timing of US interest rate rises. There is now a 70% chance of the raising in US rates on 16th December. Euro currency weakness has significantly improved returns for eurozone investors in 2015

Bonds

Eurozone bond prices were up by 1.1% last week reacting to a possible ECB interest rate cut on 3rd December and/or further quantitative easing. Overall, eurozone bonds have given a total return of plus 3.5% year-to-date. The German 10-year bond yield fell from 0.56% to 0.48% last week. Equivalent US yields fell marginally from 2.27% to 2.26%. Irish 10-year bond yield increased to 1% up from .96% last week.

Commodities

Commodity prices in general were down by 0.6% (in dollar terms) last week and are down by a hefty 20.1% so far in 2015.
The gold price was up by 2.3% on the month, ending at $1,141 per troy ounce.
The euro currency weakened against all of the major currencies as the markets priced in the possibility of an ECB rate cut. The EUR/USD rate moved from 1.12 to 1.10 over the month.

A week in the markets

Market November 15

Source: Bloomberg. Capital returns in local currency for the week to Friday 27 November 2015

(Photo: Defence Images)