November's asset performance can best be summarized in three words: oil, oil, oil. Deutsche Bank explains why:
There were some pretty big moves in markets last month with Oil clearly under the spotlight. Indeed Brent and WTI were down 18.3% and 17.9% in November with the most recent leg lower driven by OPEC's decision not to cut production volumes. For Brent November was the biggest one month decline since the height of the Lehman crisis in October 2008 whilst for WTI it was the worst since December 2008.
Brent and WTI are now 33% and 28% lower versus where it started the year and are now trading at their lowest level since the spring of 2010. Away from oil the month was also generally weak for commodities which coincides with the 5th consecutive monthly gains for the USD. Copper and Silver were down -6% and -4% respectively although Gold managed to find better support, only down 0.5% in November. On FX, JPY was a clear underperformer amongst major currency pairs following the recent surprise monetary easing announcement.
[12]
On the positive side we did see equities generally rally higher in November as well as seeing another positive month for core fixed income markets. The Shanghai Composite (11%) posted its 7th consecutive month of gains this year with November being the best month since Dec 2012. Indeed with a YTD total return of around 31% the Shanghai Composite is returning more than twice that seen from the S&P 500 (+14.0%) and over 3 times more than the Stoxx600 (9%) and the Nikkei (9%) this year. The expectations of easier monetary policy to come as well as greater investor participation via the SH-HK stock connect were possibly behind those gains.
Away from equities, core government bond markets in the US, UK and Germany produced positive total returns of 1.0%, 3.2%, and 0.9%, respectively. With the exception of US HY, credit benchmarks on both sides of the pond have generally delivered positive total returns in November although much of that is still driven by the rally in core rates. US HY (-0.8%) had a weak November after a positive month in October not helped by the performance in HY oil credits as well as seeing some mild outflows. Staying in Fixed Income, EM bonds saw negative returns in Latam (-2.5%) and EEMEA (-0.9%). Asia (+0.3%) was a relative outperformer as the region, as a net importer of energy, probably benefitted from the recent sell-off in Oil prices.
