Week 3, 2016
Not even the pessimists on Wall Street thought things would go so wrong so fast in 2016.
For the first time in 12 years, oil is below $30 a barrel. China is struggling to prop up its slowing economy and calm its volatile stock market. For the moment, the bears have the upper hand — and January is only half over.
What's Happening in the Markets this week
- Global Turmoil Darkens Path to Bank of England Rate Increase - Since the BoE's meeting last month, oil has dropped to a 12-year low, the World Bank cut its global growth forecasts, and China's yuan devaluation wiped $4 trillion from global equity markets. Those headwinds may overshadow any pressure to follow the U.S. which raised its key rate for the first time since 2006 last month.
- Gold Extends Great Start to 2016 as Risk Aversion Fans Demand - The metal posted the biggest weekly gain since August last week as escalating concerns about China's outlook, a rout in equities and increased geopolitical tensions in the Middle East and North Korea stoked investors' aversion to risk.
Commodities in Review
- Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength - A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley.
- Silver Seen Beating Gold as Ratio Rises to Near Historical Peaks - It's time for silver to outperform gold, if history is any guide. With gold trading near a two-month high, its price buys 78 ounces of silver, near the most since August. In the past two decades, the ratio has only been above that level on about five occasions, and never for more than a three months.
- U.S. index futures rose, reversing earlier losses and singling the first gain in four days for the S&P 500 Index - March contracts on the S&P 500 gained 0.6% to 1,922.75 at 9:14 a.m. in London, after an earlier decline of as much as 0.9%. Contracts on the Dow Jones Industrial Average added 67 points, or 0.4%, to 16,302. The new year brought volatility, anxiety about global growth and the worst start on record for equities both in the U.S. and globally. The S&P 500 fell on Friday, capping the steepest slide ever over five days to begin a year. A late afternoon selloff extended the benchmark's weekly decline to 6% as concern about China's slowdown overwhelmed data that showed resilience in the labor market.
- U.K. Stocks Swing to Gains After Worst Weekly Drop Since August - U.K. stocks rose for the first time in four days, buoyed by gains in banks. HSBC Holdings Plc and Lloyds Banking Group Plc climbed at least 1.1%, contributing the most to an advance in the FTSE 100 Index. The FTSE 100 gained 0.4% at 8:57 a.m. in London, reversing a slide of as much as 0.5%. The benchmark lost 5.3% last week amid concern that a slowdown in China would hamper global recovery.
- European Stocks Rebound After Worst Week Since '11 as DAX Climbs - The Stoxx Europe 600 Index gained 0.4% at 9:46 a.m. in London, reversing an earlier slide. European equities tumbled last week as concern took over that China's slowdown will hurt the global recovery, even as the ECB's stimulus is still supporting the region.
- Asia Stocks Fall to Lowest Since 2011, Extending Global Sell-off - Asian stocks declined, with a regional measure falling to its lowest level in more than four years, as concern about China's growth outlook continued to fan a global selloff.
- Emerging Stocks Slump as China Fuels Risk Aversion - Emerging-market stocks slumped to the lowest in more than six years and currencies dropped for a seventh day as concern about China's growth outlook prompted investors to shun riskier assets. All 10 industry groups in the MSCI Emerging Markets Index fell.
Lump Sum Product in Focus (Product ends January 30th) -
Structured Note - Invest in Apple, Google, Amazon and General Motors with guaranteed return of 8.4% per annum (paid quarterly in cash)
- Issuer - EFG International
- Term - 2 years
- Underlyings - Apple, Google, Amazon, and General Motors.
- Coupon guaranteed regardless of underlying performance.
- After each 3 month period, a guaranteed coupon of 2.1% (equivalent to 8.4% per annum) is paid.