Market update - November 2011
After a strong relief rally in October, equity markets re-entered negative territory in November as macro issues drove sentiment.
In Europe, the sovereign situation once again spooked investors. Market confidence remained fragile amid ongoing and largely circular discussions between the EU, IMF and Eurozone governments. Optimism created by the new solutions was soon shattered by the worsening economic reality, with GDP forecasts for 2012 and 2013 being lowered for Europe. Such is the extent of the crisis we saw the prime ministers of both Greece and Italy step down and replaced with technocratic leaders, yet this did little to stop the continued yield spike; Italian bond yields hit over 7% for the first time.
The recent downgrades in the credit ratings of Belgium and Portugal, combined with disappointing debt auctions in Spain and Italy, are just the most recent events indicating how precarious the situation in the Eurozone remains. A more shocking event was the failed auction of 10-year bonds by Germany, which was unable to place 40% of the issue.
Market contagion broadened as evidenced by Italian ten-year government bond yields rising to the highest level since 1998. Later in the month market optimism was buoyed by a possible workaround of the EU treaties to impose fiscal discipline. Furthermore, in the face of the deteriorating financial and economic conditions, the six major central banks announced lowering the USD liquidity swap facility by 50 basis points. China also cut the reserve requirement ratio by 50 basis points. In the US, the economic data was generally stronger than expected, which mitigated concerns over the slow progress of the budget Super Committee.
In Australia, the ASX300 Accumulation Index gave away around half its gains from the prior month, down by 3.4%, and the MSCI World Index down -2.7%.
The RBA cut interest rates from 4.75% to 4.50% due to the continuing global uncertainty. The Australian dollar was weaker versus the greenback, as a result of the rate cut, weaker commodity prices and negative sentiment in general.
Fund manager commentary
Read BTIM’s complete fund manager commentary for November 2011.
- 1. File description: Fund Manager Commentary - November 2011 [222.0KB]
File name: Fund_Manager_Commentary_-_November_2011_-_FINAL.pdf