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The Weekly Brief

Equity markets seem to have reached a low after the recent sell-off but the recovery has been uneven. U.S. and Japan equities have risen 5% since the trough on October 29th while EMU equities are lagging (+2%). In the U.S., the market rebound has been led by value and quality stocks while low beta stocks have shed recent gains. Concurrently, commodity prices remained under pressure. The sharp fall in benchmark indices was essentially led by energy prices in a context of higher U.S. crude oil production and stocks. Sentiment remains nonetheless fragile. High frequency indicators show a deceleration in economic activity in the largest economies, except Japan. Meanwhile, monetary normalization is unlikely to revert in the short term and political risks stay high. The newly elected Democrat members of the House, which will take over in January, are likely to initiate investigations into the U.S. President’s affairs, the 2016 campaign and the current administration.