The MSCI AC Asia ex Japan (AxJ) Index declined 5.0% in USD terms, as better US economic data prompted worries about inflation and expectations of faster interest rate rises from the Federal Reserve.
In February, US Treasuries (USTs) succumbed to a further sell-off, with yields rising across the curve prompted by better US economic data.
The Japanese equity market fell in February, with the TOPIX (w/dividends) dropping 3.70% on-month and the Nikkei 225 (w/dividends) tumbling 4.41%.
In my view, Japan is the only major country that is going through a structural improvement in corporate governance, and, thus, deserves special attention by global investors.
In our 2018 outlook, we made the case for rising volatility as central banks across the developed world slowly remove the stimulus punch bowl, but few would have imagined volatility spiking with such a vengeance as it did in recent weeks.
Poor economic and fiscal policies are, and will likely be, a recurring theme in Italian politics. However, from a trade perspective, we see Italy to remain a good carry/spread trade for at least the next twelve months against a backdrop of improving GDP growth in 2018 and 2019.
A broad-based synchronized recovery continues to gain traction. Following the strongest year of global growth since 2010 (estimated at 3%) the consensus forecast for the current year looks to be even rosier.
The Japanese equity market rose in January, with the TOPIX (w/dividends) climbing 1.06% on-month and the Nikkei 225 (w/dividends) rising 1.47%.
The MSCI AC Asia ex Japan (AxJ) Index returned 7.6% in USD terms in January, amid optimism about solid economic growth and corporate earnings. Asian currencies generally strengthened against the USD.
There was a sharp rise in US Treasury (UST) yields in January on the back of positive macro news, steady rise in oil prices and speculation that central banks in developed markets will start winding back on stimulus measures.