ETFS Multi-Asset Weekly A Turbulent Week for Investors

Highlights

• Grains continue to gain on weather disruptions in the US.
• Global equities see violent gyrations.
• Risk or inflation the driver for Japanese Yen (JPY)?

Global stocks and oil faced a particularly volatile week as investors digested weaker-than-expected data. The S&P 500 fell 3.4% in the week up to the Thursday 16th, while Brent crude oil fell 6.2% over the same time period. However, on Friday we started to see a partial recovery. The S&P 500 rose 1.2% and Brent gained 2.0% in just one day as central bank statements from James Bullard (US Federal Reserve) and Andrew Haldane (UK Bank of England) put forward the case to keep unconventional, loose monetary policy in place for longer.

Commodities

Grains continue to gain on weather disruptions in the US. Following the previous week’s rise on the back of stellar corn export numbers, rain disrupted the harvesting of grains in the US, leading to further gains. Wheat rose 4.8%, corn gained 2.2% and soybeans increased 2.6%. However, reports of improved weather are likely to cap these gains. Palladium fell 8.2%, dragged lower by the disappointing euro area industrial production and general capitulation in sentiment last week. Nickel, zinc and tin were also casualties of the same phenomenon, falling 7.3%, 5.1% and 4.7% respectively. Brent crude oil fell 6.2%, before staging a partial recovery on Friday. Gold rose 0.9%, as the metal maintained its position as the first port of call in times of turbulence. Futures market net speculative positioning in gold rose for the first time since August 2014

Equities

Global equities see violent gyrations. Developed market equities reacted excessively negatively to weaker-than-expected economic data before staging a partial recovery on Friday. The Euro STOXX® Investible Volatility Index jumped 13.9% in just one week. One catalyst to the change in sentiment on Friday was comments from James Bullard, the previously hawkish president of the St Louis Fed, pushing for a delay in ending the asset purchase programme. The FTSE MIB declined 6.7% and the DAX fell 4.7% on the disappointing industrial production data in the euro area. European bourses were weighed down by animosity between euro area members following Greece’s plans to exit its rescue programme early. Not even Chinese equities were immune from the capitulation, with China A-shares declining 1.5% on the back of weak loan growth and inflation data.

Currencies

Risk or inflation the driver for Japanese Yen (JPY)? The unwinding of global risk-on positions last week prompted a JPY rally, but we expect this will be short-lived. Positioning in JPY remains severely negative and last week’s rebound is likely to come unstuck in the near-term as investor fears fade. The minutes of the Bank of England (BoE) meeting will be the main focus for Sterling investors this week. Last month two policymakers surprised the market by voting for a rate hike (7 voted for the status quo). The market has been pushing back expectations for a rate hike from Q2 to Q3 and we expect this trend to continue. A less hawkish Board meeting will likely see the downtrend for Sterling remain in place. After last week’s oil price plunge and subsequent partial recovery, we believe that oil prices will now stabilise, removing the downward pressure on the Canadian dollar and Norwegian Krone.

Important Information

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (”FCA”).