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5. March 2017 21:32
by Irene

February 2017 - Market Commentary

5. March 2017 21:32 by Irene | 0 Comments

The month of February has seen risk on and equity markets were mostly positive amid expectations of fiscal stimulus in the United States and a more hawkish tone from the central banks of the US and the UK. Many indices hit highs as did the Purchasing Managers Index (PMI) in the United States at 57.7 and in Europe at 55.4, showing expansion on both sides of the pond. Despite the risk on scenarios, Gold returned 3% in USD for the month.

United Kingdom

The Bank of England kept its asset purchase programme on hold, but increased the forecast for UK growth in 2017 from 1.4% in November to 2%. It also expects inflation to reach 2.7% by the end of the year. This might hurt domestic growth, which we can slowly see from higher import prices feeding through to the consumer. A rate hike is not in sight yet as this onset of inflation is much more due to the fall in Sterling and higher oil prices than due to an overheating economy. Most likely we will see the Prime Minister Theresa May trigger Article 50 this month, although some last minute changes will have to be made before it can be put through.


The risks for Europe are the highest on the political front, with elections dominating the news for this year with the Netherlands kicking off this month, followed by France in April. Aside from that, the high PMI index, showing expansion, and an improved economic sentiment are encouraging. The Eurozone saw inflation pick up to 1.8%, with Germany’s inflation rising to 2.2%, resulting in more noise being made against the loose monetary policy of the ECB. <

United States

Positive macro-economic news and expectations of fiscal stimulus were driving the probability of a rate hike in March in the United States higher, from 30% at the beginning of the month to 80% at the end of February. Fed chair Janet Yellen’s testimony in front of US congress provided a further strong signal that the Fed is ready to hike, highlighting strong labour market data and rising inflationary pressures. The eyes will now be on President Trump’s details of his fiscal policies and whether he can keep his promise of extra jobs growth.

Emerging Markets

Emerging Markets joined the equities rally, returning 3.1% in USD in February, with Brazil providing the largest returns at 4.3% in USD. Inflationary pressures can be found in Emerging Markets as well, with China’s producer price index having risen to 6.9% and India’s GDP growth coming in higher than expected at 7%.

Fixed Income

Despite the risk on in markets, the reflationary trend across fixed income took a halt in February, with government bonds providing positive returns across the major countries. Investment-grade and high yield bonds followed suit, with higher returns amid the higher credit risk end.


Commodities did well more or less across the board, with WTI Crude Oil increasing by 2%, gold on the up and corn and wheat positive as well. It might be of comfort to some that cocoa is still drifting down, having lost nearly 40% from its highs at the end of April last year. If only the price of that bar of chocolate came down in line with that significant drop.

Market Returns Overview

Source: Markit, Twenty20 Investments, as of 28 Feb 2017, all returns in GBP.

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