Profitability Reports of our clients from January 2016
Friday, 05 of February 2016
Apparent lull in the financial markets after the strong shaking that took place throught the month.
As for equity markets, it should be noted the high level of correlation that these presented with the price of oil, a factor that led to sharp declines for the main stock markets since the commodity price fell below 30 USD/Brent . Even so, thanks to the action of major central banks, January finished the month flat for the European Equity, which includes dividends.
The evolution of February as to what economic data and monetary policy measures is concerned, it could be decisive for the evolution of equity markets throughout 2016. So far, the yields for 3 months and 1 year remained around -10%, well below its average of +2% and +9% respectively.
The performance of the Fixed Income has been better, especially for the Public Debt for all terms which not only recovered from previous cuts, but also reached a yield close to +2%. Those values have been significantly above their average, and have shown a significant rebound in recent sessions thanks to the support of Central Banks. For the 3 months performance however, it was itself in line with the average figure, while the annual average yields continued holding well below the historical average of +5%.
We have been able to identify rallies on the profitability of the Public Debt at 1 and 3 years as well. Even so, compared to previous data it is still low (+0,16% compared to the +0,2% historical average). Similarly, the cumulative returns of three months and a year were significantly below their respective averages.
Corporate debt instead, was injured by falls in the prices of many of the bonds issued, especially those referenced to mining companies and oil industry following the constant cuts in their respective market prices. And despite the global balance has been penalized with just a 0,10%, the annual average falls accumulated near -3% compared to its historical average of +0,3%.
Finally, the worst performance in the fixed income markets has been featured by the Convertible Debt, which following the weakness in equity markets, has left a -1,70% during the last month and collects annual declines of -2,40% compared to its average of +7%.
Usually, as shown in the box returns over the past 12 months, the fixed income markets have suffered severe cuts, especially those most linked to corporate level values. The exception were the government bonds which are still present and below average yields, and managed to maintain the positive sign.
Changes in currency markets were scarce. Movements in the EUR/USD were limited given that the exchange rate is within the area between 1,08 and 1,097 EUR/USD. The trend was the same for the EUR/JPY and pair which ended the month trading at levels of 131,38 EUR/JPY. We expect to see future changes if further monetary policy in the forthcoming meetings of the major central banks is held.
The exception found has been the pound, which due to poor macro data releases and the growing risk of Brexit, its quote was cut by -3% over the common currency. So that it closed January trading at levels +0,7599 EUR/GBP although minimum levels were reached at +0,7324 EUR/GBP.