Arkus Focus December 2014
Japan and Oil
by Niall O'Connor
- Volatility trends were downwards during November after the very high levels seen during October. Japanese and Oil/energy volatilities were High, most others were low or medium relative to their 12-month averages.
- Realised volatility (of Eurostoxx equities over 30 days) fell back from 25.9% to 18.9% (High to medium).
- Equity markets had a strong month. Volatility trends were sharply downward, but from near 12-month highs. Sector volatilities were also down, at 6-8% (Energy 26% though, High). All other major sectors had low to medium volatilities relative to the last 12 months.
- Sovereign bond prices rose yet again during the month. The great European convergence continued with Spanish bond yields dropping to 1.9%. Bond volatilities fell in all regions ex Japan, ranging from 2-3% (and 5.1% in Italy).
- In FX the Dollar continued its upwards creep but the Yen once again dropping sharply. Volatility changes were generally downwards: e.g. €/$ to 8.1%, but €/Yen rose to 12.5%. Volatilities are mostly High compared to the last 12 months.
- Option volatility will have been driven mostly by the large moves in underlying prices. Volatility of the VIX fell to 63% (low).
- Commodities prices were down sharply again: Oil fell -18% and Copper -6% on the month. Volatility trends were upwards, Oil up to 30.3% (High).
- Real Estate (equity) price moves were upwards in all regions. Volatility changes were downward: to 11.8% in Europe and 9.9% in the US. US volatility dropped to low, Japan had High volatility. Alternatives’ volatilities were sharply down.