Global stocks beat all assets for a third month in November, the longest winning streak since 2009, on signs that economic growth is accelerating. Commodities extended declines as gold fell the most since June.
The MSCI All-Country World Index (SPX) of equities in 45 markets rose 1.5 percent including dividends and the Standard & Poor’s 500 Index reached a record as China pledged to expand economic freedoms, the European Central Bank cut interest rates and speculation increased the Federal Reserve will delay reducing stimulus. The U.S. Dollar Index advanced 0.6 percent and the S&P GSCI Total Return Index of 24 commodities fell 0.8 percent. Bonds of all types lost 0.16 percent on average, according to Bank of America Merrill Lynch’s Global Broad Market Index.
“The story is still around the combination of easy monetary policies and expectations of growth into 2014,” said Bill O’Neill, the London-based head of U.K. Chief Investment Office Research at UBS Wealth Management, which oversees $1.9 trillion of assets. “There is this belief that growth is coming towards us. Even if it’s not imminent, it’s on the horizon.”
With the combined market value of global equities up by about $5.9 trillion in the past three months, individual investors are just now coming back to stock markets. They have sent about $30 billion to managers in 2013, which would make this year the first since 2006 that equity funds have seen net inflows, after almost $400 billion was withdrawn in the previous four years, according to data compiled by the Washington-based Investment Companies Institute.
While the average of 19 forecasts compiled by Bloomberg showing the S&P 500 will fall 4 percent to 1,733, December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928.
The average return for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent. That would put the S&P 500 index at 1,832.9 by the end of the year, giving 2013 the best annual return since 1997.
The MSCI All-Country World Index reached its highest since January 2008 on Nov. 29. The gauge rose 18 percent this year, heading for its best annual return since 2009. The Nasdaq Composite Index closed at the highest level in 13 years on Nov. 29 and Japan’s Nikkei 225 Stock Average (NKY) advanced to the most since 2007 the previous day. The rally pushed U.S. equity valuations close to their richest since the end of 2009, with the S&P 500 trading for 16.3 times its companies’ projected earnings, data compiled by Bloomberg show.
“The economy looks much, much more healthy,” said Michael O’Sullivan, the chief investment officer for the U.K. and Eastern Europe, Middle East and Africa at Credit Suisse Private Banking & Wealth Management, which oversees about 1.27 trillion Swiss francs ($1.4 trillion). “The Fed is moving towards taking some liquidity out of the market and the ECB is trying to be as accommodative as it possibly can.”
Minutes of the Fed’s last meeting showed policy makers expected ongoing improvement in the labor market to “warrant trimming the pace of purchases in coming months.” Vice Chairman Janet Yellen, nominated as Chairman Ben S. Bernanke’s successor, signaled last month the economy is not yet strong enough to warrant cuts in the $85 billion monthly bond purchases, which enhance the central bank’s policy of easy credit.
As of Nov. 19, four of five investors, traders and analysts who are Bloomberg subscribers expected the Fed to start buying fewer bonds in March or later, with just 5 percent looking for a move this month, the Bloomberg Global Poll found.
The European Central Bank cut its benchmark interest rate by a quarter point to 0.25 percent on Nov. 7. Governing Council member Ardo Hansson said Nov. 25 the bank stands ready to reduce borrowing costs further and is technically prepared to make its deposit rate negative.
Silver was the biggest loser in commodities, dropping 8.4 percent to $20.033 an ounce in New York. It’s dropped 36 percent this year. Gold retreated 5.5 percent to $1,250.40 an ounce. The metal slumped 27 percent since the start of January, on track for its first annual loss since 2000, as some investors lost faith in bullion as a store of value. Goldman Sachs Group Inc. expects gold to trade at $1,110 in 12 months, compared with today’s settlement of $1,221.90 in New York.
Industrial metals also were among the biggest losers, with copper declining 2.7 percent to $7,055 a metric ton and nickel plunging 7.5 percent to $13,515 a ton in London. There will be gluts in aluminum, copper, nickel and zinc this year or next, according to Barclays Plc. The LMEX Index of six metals fell 12 percent since the start of January. Barclays says copper will average $6,500 in the fourth quarter next year.
West Texas Intermediate, the benchmark U.S. crude grade, dropped 3.8 percent to $92.72 a barrel in New York trading. The U.S. is meeting 86 percent of its own energy needs, the most since 1986, Energy Department data show. It will overtake Russia and Saudi Arabia as the world’s largest oil producer by 2015, the Paris-based International Energy Agency estimates.
Brent crude, the European benchmark, advanced 0.8 percent to $109.69 a barrel in London. Prices are little changed since Iran and world powers agreed to loosen economic sanctions in return for limits on the nation’s atomic activities on Nov. 27, a sign traders are skeptical it will lead to more supply from what was once OPEC’s second-biggest producer. Goldman is predicting a price of $105 in 12 months.
Wheat rose 0.2 percent to $6.6875 a bushel in Chicago, leaving this year’s decline at 14 percent. Corn dropped 0.9 percent to $4.245 a bushel, for an annual retreat of 39 percent. Farmers around the world will reap the biggest-ever harvests for both crops, the U.S. Department of Agriculture estimates.
Bank of America Merrill Lynch’s Global Broad Market Index, tracking debt securities valued at about $45 trillion, rose 0.3 percent this year.
U.S. Treasuries depreciated 0.4 percent in November, after rallying the previous two months. Yields on 10-year U.S. government debt may climb to 3.1 percent by the middle of next year, from 2.7 percent, according to the median estimate of 64 economists surveyed by Bloomberg News.
“We’re going to see a lot of months where the Fed is the dominant story,” said John Rutledge, chief investment strategist at Safanad, the New York-based investment firm. “The tapering story worries people from the point of view of whether the Fed is there to sop up Treasury issues.”
High-yield (BHYC) bonds rose 0.4 percent last month after gaining 2.2 percent in October, according to the Bloomberg Global High Yield Corporate Bond Index. Speculative-grade debt is rated below Baa3 by Moody’s Investors Service and BBB- by S&P.
Portugal’s bonds were the best performers in November among the 26 sovereign markets tracked by Bloomberg and the European Federation of Financial Analysts Societies, rising 1.9 percent. Italy’s were second with a 0.9 percent gain. Greece’s debt lost the most with a 1.8 percent decline.
The 17-nation euro rose 0.1 percent versus the greenback and Japan’s yen fell 4 percent. Europe’s currency is forecast to weaken to $1.30 against the dollar by the middle of next year, from $1.3591, according to the median estimate of economists surveyed by Bloomberg. Japan’s is estimated to weaken to 104 from 102.44.
Developing-country bonds lost 1.2 percent in November after gaining in the previous two months, according to the Bloomberg USD Emerging Market Composite Bond Index. (BEM) The MSCI Emerging Markets Index fell 1.6 percent, the first decline since August and taking this year’s drop to 3.5 percent.
The Philippine Stock Exchange PSEi Index posted the biggest loss among emerging nations in Asia, Europe and Africa monitored by Bloomberg, dropping 5.7 percent after Typhoon Haiyan swept away coastal towns on Nov. 8, killing more than 5,000 and displacing 3.4 million others.
“I have not seen any appetite to invest into EM,” Benoit Anne, the head of emerging-markets strategy at Societe Generale SA in London, wrote in an e-mail. “Fear of the Fed is still prevailing, and seasonality turning negative, with investors reluctant to take on risk as year-end looms.”
The rupiah led losses in developing nations, sliding 5.8 percent against the dollar, amid concern Indonesia’s current-account gap will leave the nation vulnerable to fund outflows. The Czech koruna slumped 5.8 percent versus the euro after the country’s central bank bought foreign currency valued at about 200 billion koruna ($9.9 billion), about 5 percent of economic output, in a bid to ward off the threat of deflation. South Africa’s rand lost 1.3 percent to 10.1742 per dollar, the largest retreat since August.
Foreign investors sold 31.6 billion rand ($3.1 billion) of South African bonds and equities last month through Nov. 28, the biggest capital outflow since Sept. 2011, according to JSE Ltd. data. The economy expanded at the slowest pace since the recession in 2009 in the third quarter. The rand weakened 17 percent this year.
“The economic momentum and the monetary policy momentum are better in the developed economies,” said Jim McDonald, chief investment strategist at Northern Trust Corp. in Chicago, which manages about $846 billion of assets. “There is still too much uncertainty in the emerging world and that’s what their stocks are reflecting.”
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