Pages

About Us

My photo
CurAlea Associates LLC is an independent risk and due diligence advisory firm focused on hedge funds and family offices.

Monday, March 2, 2015

February 2015 - Monthly Market Commentary

February was a strong month for global risk assets.  Equity markets rallied sharply, energy commodities rebounded from recent lows, and credit spreads tightened, while the safe havens of US Treasuries and Gold retreated.  Though global investors fretted briefly about the possibility of a Greek default and the ongoing civil war in Ukraine, both situations calmed by month end, with a four month bailout extension in Greece and a cease fire announced (though not entirely implemented) in Ukraine.  The US monthly jobs report showed continued strong hiring in January with a 257,000 advance in payrolls; the unemployment rate ticked up to 5.7%.  Towards the end of the month, Federal Reserve chair Yellen testified before Congress and indicated that the central bank is considering interest rate hikes on a meeting by meeting basis; investors largely interpreted her remarks as dovish, with most delaying their expectations for the first increase in interest rates since 2006 until September or October.
Global M&A activity remained strong in February.  Notable announced deals included SS&C’s acquisition of Advent Software for $2.7 billion, Staples’ purchase of Office Depot for $6.3 billion, BT Group’s acquisition of mobile operator EE from Deutsche Telekom and Orange for $19 billion, Pfizer’s purchase of Hospira for $17 billion, Verizon’s sale of a package of landline assets to Frontier Communications for $10 billion and wireless towers to American Tower for $5 billion, Harris Corp’s acquisition of Exelis for $4.8 billion, TPG’s sale of EnvisionRx to Rite Aid for $2 billion, Expedia's purchase of Orbitz for $1.3 billion, Ambang Insurance Group’s purchase of a majority stake in Tong Yang Life Insurance for $1 billion, Berkshire Hathaway’s acquisition of Detlev Louis Motorradvertriebs GmbH for approximately $400 million, Valeant Pharmaceuticals’ purchase of Salix Pharmaceuticals for $10 billion, and Stifel Financial’s acquisition of Sterne Agee for $150 million .
Developed market equity markets rose strongly in February (see page 8).  Italy (+9%), Japan (+7.9%), and Spain (+7.8%) saw the biggest gains, while the S&P 500 rose 5.7%.  US small caps slightly outperformed, with the Russell 2000 up 5.9% (see page 2).  Consumer Discretionary (+8.6%), IT (+8.2%), and Materials (+8%) were the best performing US sectors, while Utilities (-6.4%), Energy (+4.1%), and Consumer Staples (+4.2%) were the worst performing (see page 2).  Large cap growth (+6.7%) outperformed large cap value (+4.8%) in February (see page 3).  Emerging Market equities were almost all higher in February (see page 9), with the biggest gains in Argentina (+20.2%), Russia (+10.7%), and Brazil (+9.5%); Thailand (-0.5%), Korea (+0.9%), and the Philippines (+1.4%) were the worst performing. 
In currencies, the USD Index strengthened 0.5% in February (see page 10).  The weakest developed market currencies against the USD were the Swiss Franc (-3.5%), the Japanese Yen (-1.7%), and the Euro (-0.8%), while the New Zealand Dollar (+4.2%), British Pound (+2.5%), and Canadian Dollar (+1.8%) strengthened against the USD.  The USD was weaker against most emerging market currencies with the biggest gains in the Russian Ruble (+10%), Thai Baht (+1%), and the Indian Rupee (+0.9%) (see page 10); the Brazilian Real (-6.1%), Turkish Lira (-2.6%), and Indonesian Rupiah (-2%) weakened against the USD.
The US Treasury yield curve steepened in February (see page 12).  10 year rates closed the month at 1.99%, up from 1.64% at January month end.  Investment grade and high yield credit spreads tightened in February (see page 13).
In commodities, the GSCI index rose 6.5% in February (see page 11), with gains in Energy (+10.9%), Agriculture (+2%), and Industrial Metals (+0.6%); losses were seen in Livestock (-2.3%) and Precious Metals (-5%).  Within individual commodities, Heating Oil led gains (+17.9%), followed by Gasoline (+15.9%), Brent Crude (+14.9%), and Cocoa (+12.1%); Coffee (-14.7%), Sugar (-6.6%), Lean Hogs (-6.6%), and Gold (-5.2%) moved lower.

Contact CurAlea Associates for a Daily Market Review.