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Monday, December 1, 2014

November 2014 - Monthly Market Commentary

November saw a continuation of recent market trends, with the US dollar strengthening, oil continuing its selloff, and global equity markets moving higher.  The oil price weakness was punctuated at month end by the meeting of OPEC, which decided not to cut production, leading to an acceleration in the energy market selloff.    The US monthly jobs report showed continued steady job growth, with employers adding 214,000 jobs in October and the unemployment rate falling to 5.8%.  While developed market central banks made no major policy changes in November, the People’s Bank of China cut interest rates for the first time in more than two years.

Global M&A activity showed renewed strength in November.  Notable announced deals included Laboratory Corp.’s $6.1 billion acquisition of Covance, Publicis’ $3.7 billion purchase of Sapient, Sterling Bancorp’s $539 million merger with Hudson Valley Holding Corp., Carlyle Group’s $700 million acquisition of Dealogic, Perrigo’s $4.5 billion acquisition of Omega Pharma, Cott’s $1.25 purchase of DSS Group, BB&T’s $2.5 billion acquisition of Susquehanna Bancshares, Berkshire Hathaway’s $4.7 billion purchase of Duracell from Procter & Gamble, Halliburton’s $34.6 billion acquisition of Baker Hughes, Actavis’ $66 billion purchase of Allergan, Kotak Mahindra’s $2.4 billion acquisition of ING Vysya Bank, Aviva’s $8.8 billion purchase of Friends Life Group, and RenaissanceRe’s $1.9 billion acquisition of Platinum Underwriters.
Developed market equity markets largely rose in November (see page 8).  Germany (+6.9%), Japan (+6.2%) and France (+4%) saw the biggest gains; Australia (-3.5%) was lower on the month.  US small caps underperformed, with the Russell 2000 up 0.1%, while the Russell 1000 was up 2.6% (see page 3).  Consumer Staples (+5.5%), Consumer Discretionary (+5.4%), and Information Technology (+5.3%) were the best performing US sectors, while Energy (-8.5%), Telecom (+1.2%) and Utilities (+1.2%) were the worst performing (see page 2).  Large cap growth (+3.2%) outperformed large cap value (+2%) in November (see page 3).  Emerging Market equities were mixed in November (see page 9), with the biggest gains in Taiwan (+3.2%), India (+2.7%), and Thailand (+2.1%) and the biggest losses in Malaysia (-2.1%), Mexico (-1.6%), and Argentina (-1.2%). 
In currencies, the USD Index strengthened 1.7% in November (see page 10).  The weakest developed market currencies against the USD were the Japanese Yen (-5.3%), the Norwegian Krone (-4%) and the Australian Dollar (-3.3%).  The USD was stronger against emerging market currencies with the biggest gains against the Russian Ruble (-14.7%), Brazilian Real (-3.7%), and the Korean Won (-3.5%).
The US Treasury yield curve flattened in November (see page 12).  10 year rates closed the month at 2.16%, down from 2.34% at October month end.  Investment grade and high yield credit spreads tightened in November (see page 13).
In commodities, the GSCI index fell 10.9% in November (see page 11), with losses in Energy (-15.7%), Industrial Metals (-3.1%), and Precious Metals (-0.2%); gains were seen in Agriculture (+0.4%) and Livestock (+0.9%).  Within individual commodities, Brent Crude led losses (-18.9%), followed by Crude Oil (-17.8%), Gasoline (-14.2%), and Heating Oil (-13.4%); Wheat (+7.2%), Natural Gas (+3.1%), Palladium (+2.6%), and Feeder Cattle (+1.1%) gained; Gold gained 0.3%.
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