The Best And Worst Performing Assets In September, Q3 And 2017 YTD

While September and Q3 were the latest solid month for US risk assets, which ended the month and quarter at all time highs, across the globe returns were relatively more mixed for the sample of assets tracked by Deutsche Bank. That said, a large number of assets (21 of 39 in local currency terms) finished with a total return between -1% and +1% which in part reflects another month of incredibly low volatility with the VIX in particular spending much of it trading between 9.5 and 11.0. In the end, excluding currencies 19 out of 39 assets finished the month with a positive total return in local currency and USD hedged terms.

As Deutsche Bank"s Jim Reid reports this morning, in terms of the movers and shakers, commodities dominated the top of the German bank"s leaderboard with Wheat (+9%), WTI (+9%) and Brent (+8%) all finishing with a high single digit return. It’s worth noting however that this does follow heavy falls for the price of Wheat and WTI in August. Equities generally had a strong month, particularly in Europe where a slightly weaker euro (-1%) aided local currency returns. The DAX (+6%), FTSE MIB (+5%), Stoxx 600 (+4%), Portugal General (+4%) and IBEX (+1%) all finished firmer - the latter underperforming however reflecting elevated tension around the Catalan referendum. Returns in USD terms were 0% to +6%. It’s worth also noting the return for European Banks (+5% local, +4% USD) which got a boost from the slightly higher rate environment. There were two standout underperformers in equity markets however. The first was the Greek Athex which tumbled -8% in local terms although still remains up an impressive +19% YTD. The other was the FTSE 100 which fell -1% under the weight of a strong month for Sterling (+4%) following the BoE signalling an imminent rate hike as well as some progress around Brexit talks. Indeed in USD terms the FTSE 100 was up +3%.

There was a similar story for Gilts (-3%) which underperformed other sovereign bond markets during the month. Bunds, Treasuries, Spanish Bonds and BTPs all returned less than -1% in local terms and up to -2% in USD terms. Meanwhile credit market performance was unspectacular given the move in rates. The notable theme was the outperformance for HY though with EUR and US HY up around +1% in local currency terms. More rate sensitive IG indices were weaker however, albeit outperforming sovereign bond markets. EU and US IG Non-Fin, Fin Sen and Fin Sub finished in the range of 0% to -0.5% in local terms.

Taking a step back, for Q3, the big winners during the quarter were commodities and EM markets. Of the top ten in local currency terms, seven fit one of these categories including the Bovespa (+18%), Brent (+15%), Micex (+14%), WTI (+12%), Copper (+10%), MSCI EM Equities (+8%) and the Shanghai Comp (+6%). The FTSE MIB (+11%), Hang Seng (+9%) and Portugal General (+6%) round out the other three places.

DM equity markets were generally up +1% to +5% (S&P 500 returned +5% and Stoxx 600 +3%). The IBEX (0%) and Athex (-8%) were the notable underperformers. Meanwhile sovereign bond markets witnessed very modest positive returns of less than +1% (although +4% for European bond markets in USD terms). Gilts did however return -0.5% in local terms. Credit market performance was solid reflecting a largely carry-return environment. Higher beta credit outperformed (HY and Fin Sub +2% in local terms) while IG indices were around +1% for the quarter.

Finally, here is a snapshot of the best and worst assets, and everything inbeteen, since January 1, 2017.

Unprecedented Corruption Among Brazil's Top Politicians Revealed In Unsealed JBS Plea Bargain

Recall that behind the latest political scandal to grip Brazil, in which president Michel Temer was accused of paying hush money to the jailed former House speaker, Eduardo Cunha (who was responsible for the impeachment of Temer"s predecessor Dilma Rouseff) to keep him from dragging Temer down as well, and which yesterday led to historic losses for the the Bovespa, was a plea bargain by the top executives of Brazil"s meatpacking giant JBS, Joseley Batista and his brother Wesley, which among other things, included an alleged recording of a phone conversation in which Batista told Temer he was paying Cunha to remain silent, to which the president was recorded saying, "You need to keep that up, okay?"

Batista and Temer

Moments ago, Brazil"s O Globo newspaper reported that the latest episode in Brazil"s epic political corruption saga has been unveiled, and two things emerged. First, president Temer is under now officially under investigation for corruption and obstruction of justice.

Second, and more important, the contents of the JBS plea bargain testimony were disclosed, courtesy of Reuters, and they reveal corruption so pervasive that virtually every single current and past top politician has been implicated. Here are the details:

• JBS PLEA-BARGAIN TESTIMONY INDICATES BRAZIL PRESIDENT TEMER ALLEGEDLY RECEIVED 15 MILLION REAIS IN BRIBE IN 2014


• JBS PLEA-BARGAIN TESTIMONY SAYS COMPANY PAID BRIBE TO TEMER TO END PETROBRAS MONOPOLY ON NATURAL GAS


• JBS PLEA-BARGAIN TESTIMONY SAYS EX PRESIDENT LUIZ INACIO LULA DA SILVA RECEIVED $50 MILLION IN BRIBES IN OFFSHORE ACCOUNT


• JBS PLEA-BARGAIN TESTIMONY SAYS EX PRESIDENT DILMA ROUSSEFF RECEIVED $30 MILLION IN BRIBES IN OFFSHORE ACCOUNTS


• JBS PLEA-BARGAIN TESTIMONY INDICATES JOESLEY BATISTA PAID 30 MILLION REAIS FOR EX PRESIDENT DILMA ROUSSEFF"S 2010 CAMPAIGN


• JBS PLEA-BARGAIN TESTIMONY SAYS PAID SUSPENDED SENATOR, EX PRESIDENTIAL CANDIDATE AECIO NEVES BRIBE IN 2014 TO FAVOR COMPANY


• BRAZIL PROSECUTORS SAY JOESLEY BATISTA"S TESTIMONY INDICATES HE PAID EX HOUSE SPEAKER CUNHA MONTHLY BRIBES WITH TEMER"S BLESSING

Some more from Reuters:

Brazil"s Supreme Court released plea-bargain testimony on Friday that includes accusations President Michel Temer received 15 million reais ($4.6 million) in bribes in 2014 before he took office from executives of meatpacking giant JBS SA. 

The testimony also claims former President Luiz Inacio Lula da Silva received $50 million in bribes in offshore accounts from JBS, while ex-President Dilma Rousseff took $30 million in bribes in offshore accounts.

If true, the plea testimony implicates virtually all top Brazilian politicians - from both the current and previous administrations - who have now been thrown under the bus for corruption and bribery, which while no longer surprising in all matters Brazilian, prompt one to ask: is there any politician left in Brazil who is clean "enough" to take over the presidency without fears of compromising recordings emerging just months if not weeks later, resulting in another political scandal and more chaos in the biggest Latin American nation.

Hedge Fund CIO: "The Market Doesn’t Care About Health Care. Poor People Care About Health Care"

From Eric Peters, CIO of One River Asset Management, here is a topical anecdote, as well as a review of the key events in the past week.

Weekend Notes

“Where’s the beef?” bellowed Biggie Too. “Health care, regulation reform, tax cuts – where’s it at?” continued the Chief Global Strategist for one of those too big to fail affairs.

“You boys were always gonna face this moment,” barked Biggie, sliding into a slow groove.

“But here’s the thing brotha. The market doesn’t care about health care - you know that. Poor people care about health care. And the market doesn’t care about poor people. No one cares about poor people.” Biggie nodded, smiled, a big golden smile.

And pulled out a roll; crisp $100 notes. “The market only cares about taxes, regulations baby. It’s all about the Benjamins.”

Overall:

• “You cannot spend all the money on drinks and women, then ask for help,” said some Dutch dude with an utterly unpronounceable name, trying on a little Trump, just to see how it feels to call it as you see it. “Dijsselbloem lost a great opportunity to be quiet,” responded Italy’s failed former prime minister Renzi. “Dijsselbloem’s European vision is evident in the union’s policies: a presumed economic, moral and even cultural superiority coming from northern countries, to the detriment of the South,” announced the Five Star Movement, memories of Berlusconi’s Bunga Bunga parties echoing off the ruins of Caligula’s castle.


• “It’s worth bearing in mind that the UK helped restructure Germany’s post-war debts at the 1953 London conference,” said Sir Bill Cash, presiding over the EU Exit Committee, reminding Europeans of the devastation inflicted by Germany. You see, Sir Cash wants nothing of the E60bln Brexit bill. “It might be worth tactfully reminding people - not one of my strongest points - that there’s a realistic position here that we don’t really owe anything to the EU,” concluded Cash, Europe’s endless war with itself always a scratch below the surface.


• The European Central Bank urged Brussels to toughen sanction procedures against governments who persistently fall foul of its economic rules, as over 90 per cent of its reform recommendations had been ignored by member states last year.


• “If they weren’t ashamed, they would revive the gas chambers,” said Turkish President Erdogan, referring to the Dutch and Germans for their opposition to his revival of the Ottomon Empire. “Turks in Europe should have five children, not three, because you are the future,” ordered Erdogan, fanning the Far Right’s anti-Islam flames. And in America, the Republican majority refused to deny 24mm poor people health care. Then moved on to our only real problems, like over-regulation and complex taxation.

Week-in-Review (expressed in YoY terms):

Mon: May to trigger Article 50 on Mar 29th, German PPI +3.1% (5yr high), Macron takes lead in 1st round poll with 25.5% (Le Pen 25.0%), Comey testifies on Russia links to Trump (discredits Trump claims of Obama wiretapping and other conspiracy theories), S&P -0.2%; Tue: Japan sovereign CDS hits 2008 lows (45bps), RBA warns of housing market froth, Macron performs well in debate (Le Pen shows poorly), UK CPI +2.3% (3.5yr high), UK home prices +6.2%, US Q4 current account deficit -0.1 to 2.4%, fears rise that Trump running into legislative obstacles, Trump record low 37% approval rating (58% disapproval), small-cap stocks surrender 2017 gains, S&P -1.2% (largest fall since Oct); Wed: Chinese banks ordered to rein in home loan growth (iron ore -6%), Japan exports +11.7% (+28.2% to China, +0.4% to US) imports +1.2%, UK terror attack (4 dead), EU current account surplus 15mth low, US oil stocks jump (imports surge), existing home sales slow (limited supply, high prices), S&P +0.2%; Thur: EU banks borrow E223bln from TLTRO, UK retail sales +3.7% (online +20.7%), Fed’s Williams “3-4 rate hikes make sense in 2017,” new home sales rise most since July, unemployment claims +15k to 258k (highest since Jan), S&P -0.1%; Fri: Japan PMI -0.7 to 52.6, Egypt’s Hosni Mubarak released, Russia cuts 25bps to 9.75% (1st cut in 7mths), EU PMIs hit 6yr high, Le Pen meets Putin and says “Russia will not interfere in French elections,” Pope Francis urges Europe to “show solidarity” as the antidote to populism, Portuguese budget deficit 40yr low of 2.1%, US drillers wkly rig count +21 to 652 (vs 372 last March), US M&A deals -21% vs Feb 2016, Trump approves Keystone pipeline, Republicans abandon healthcare vote (Trump moves on to tax reform), VIX index jumps to 2017 high of 14.16 (settled 12.96), Mnuchin “Tax reform much simpler than healthcare,” durable goods orders rise, S&P -0.1%; Sat: 60th anniversary for the EU.

Weekly Close:

S&P 500 -1.4% and VIX +1.68 at +12.96. Nikkei -1.3%, Shanghai +1.0%, Euro Stoxx -0.5%, Bovespa -0.6%, MSCI World -1.0%, and MSCI Emerging +0.2%. USD rose +1.0% vs Australia, +0.6% vs Brazil, and +0.2% vs Canada. USD fell -1.6% vs Mexico, -1.3% vs Yen, -0.8% vs Turkey, -0.7% vs Sterling, -0.6% vs Euro, -0.5% vs Russia, -0.3% vs China, -0.3% vs Chile, -0.1% vs Indonesia, and -0.1% vs India. Gold +1.3%, Silver +2.0%, Oil -2.3%, Copper -1.8%, Iron Ore -7.9%, Corn -3.3%. 5y5y inflation swaps (EU -3bps at 1.65%, US -2bps at 2.39%, JP flat at 0.49%, and UK +8bps at 3.51%). 2yr Notes -6bps at 1.26% and 10yr Notes -9bps at 2.42%.

YTD Equity Indexes:

Poland +20.9% priced in US dollars (+14.1% priced in zloty), Argentina +18.9% in dollars (+16.5% in pesos), Mexico +18.1% (+7.5%), Chile +16.5% (+14.7%), Korea +15.9% (+7.0%), India +15.6% (+11.3%), Taiwan +14.3% (+7.0%), Spain +12.9% (+10.2%), Singapore +12.9% (+9.1%), Turkey +12.9% (+15.7%), South Africa +12.3% (+1.7%), Austria +10.7% (+8.1%), Brazil +10.7% (+6.0%), HK +10.5% (+10.7%), Czech Republic +9.2% (+6.6%), Netherlands +8.4% (+5.9%), NASDAQ +8.3% (+8.3%), Malaysia +7.8% (+6.3%), Germany +7.6% (+5.1%), Switzerland +7.6% (+4.8%), Italy +7.5% (+5.0%), Sweden +7.4% (+4.1%), Australia +7.2% (+1.5%), Euro Stoxx 50 +7.2% (+4.7%), Indonesia +6.9% (+5.1%), Belgium +6.4% (+3.9%), China +6.2% (+5.3%), Japan +6.0% (+0.8%), Thailand +5.9% (+2.0%), France +5.8% (+3.3%), Finland +5.0% (+2.5%), Philippines +4.9% (+6.3%), Denmark +4.7% (+2.3%), S&P 500 +4.7% (+4.7%), New Zealand +4.1% (+2.8%), UK +4.0% (+2.7%), Israel +4.0% (-1.3%), Ireland +3.9% (+1.5%), Portugal +3.9% (+1.4%), Colombia +3.3% (-0.4%), Hungary +2.4% (+0.3%), Norway +2.4% (+0.8%), Canada +1.6% (+1.0%), Greece +1.2% (-1.2%), Russell -0.2% (-0.2%), UAE -1.1% (-1.1%), Russia -1.9% (-8.6%), and Saudi Arabia -4.5% (-4.6%).

These Were The Best And Worst Performing Assets In October And YTD

October was a month most investors will wish to quickly forget. As DB"s Jim Reid writes, for the most part October will likely be remembered as the month where ‘Hard Brexit’ concerns well and truly jumped into the spotlight and Sterling related assets suffered as a result. Politics was a fairly consistent theme during the month however with the US Presidential Election campaign also attracting plenty of attention. Earnings season has provided another distraction for markets while we’ve also had the usual focus on central banks including a number of speculative ECB stories. Add to that the ongoing OPEC related news and it’s certainly made for a busy October.

As DB adds, it was sterling assets which really stand out. Unsurprisingly the negative news flow had a big impact on the currency with Sterling dropping -6% during the month from around $1.30 to the low $1.20’s. Negative sentiment also hurt Gilts which in local currency terms dropped -4% however in USD hedged terms plummeted -10% and the most amongst the assets in the asset sample. It was a similar story for UK equities which were up 1% in local terms but -5% in USD terms. Given the moves for Gilts, Sterling credit also had a poor total return month despite the BoE purchasing scheme impressing with the initial pace of purchases in October. Indeed GBP corps, non-fins and fins were -8% to -9% in USD total return terms (and -2-4% in local currency terms) although GBP HY (0% local and -6% USD terms) did outperform.

It wasn’t just Gilts which suffered in bond markets however. With markets also reassessing inflation expectations, in USD terms BTP’s (-5%), EU Sovereigns (-4%), Bunds (-4%) and Spanish Bonds (-4%) all suffered. BTPs being also hit as the polls leaned slightly towards a rejection of the senate reform referendum in early December. Treasuries (-1%) outperformed but were still weaker during the month. Those moves had another obvious knock on in credit markets too although performance was reasonably resilient despite the rates selloff. US credit outperformed with indices finishing flat to -1% during the month while European indices were broadly -1% to -3% with ECB purchases still evidently having a positive impact and helping out-perform rates. Interestingly EUR higher beta HY and sub-fins outperformed more.

Speaking of financials, banks had a decent month. European Banks were +9% in local terms and +6% in USD terms no doubt supported by better than expected earnings to some degree, and also the positive correlation to the move higher for bond yields. Other equity markets were more mixed however. The FTSE MIB, Nikkei and IBEX were all +2% in USD terms while the DAX (-1%), S&P 500 (-2%) and Stoxx 600 (-3%) were more disappointing. It was a similar story for EM equities too which were little changed during the month, although the Bovespa (+14%) did top the table for the month. The other asset class to highlight is commodities. Oil traded around OPEC headlines and had looked on to course to end the month flatish before yesterday’s sharp plunge saw WTI and Brent finish -3% and -4% for the month respectively. It was the softs which outperformed with Corn (+5%) and Wheat (+4%) continuing the strong performance from the end of September, while Gold (-3%) and Silver (-7%) were down as Fed rate hike expectations for December crept above 70%. All in all, in local currency terms 17 of the 39 assets finished with a positive return while just 12 assets did in USD terms.

A quick refresher where we are YTD now. It’s the usual culprits which head the top of the leaderboard in local currency terms with the Bovespa (+50%), Silver (+29%), WTI (+27%) and Gold (+20%) leading while Russian equities (+18%) round out the top five. Sterling (-17%) takes up the bottom place while Italian equities (-17%) and European Banks (-13%) are still languishing. It’s worth noting however that these assets have bounced back from heavier losses earlier in the year.

Elsewhere the S&P 500 (+6%) has had a reasonable YTD while the Stoxx 600 (-4%) has struggled. Bond markets outside of Gilts are in the 1-5% return range while credit markets have had a strong year. European indices are up anywhere from 4-8% while USD IG indices are up 5-9%. US HY is leading the way however, returning +14% YTD.

Source: DB