Global equities performed poorly on a hedged basis (-2.8%), but with the $A weakening significantly against the $US unhedged returns (in $A) were positive for the month (+1.0%). Emerging markets underperformed Global equities on an unhedged basis (in $A). There was a wide disparity between country performances in local currency terms. The European countries of Austria, Greece, Portugal and Spain were weak. Conversely, Germany, Ireland, Norway, Sweden, Switzerland, UK and the US were the standout performers on a relative basis. In an environment of risk aversion, the defensive sectors of Consumer Staples, Health Care, Telecoms and Utilities posted strong returns. Energy and Industrials did well, but other cyclical sectors such as Materials and Consumer Discretionary performed poorly. Financials struggled on the back of renewed concerns about the US’s ability to reach a policy consensus, the European debt crisis and concerns regarding exposures to the European sovereign crisis.

Australian equities finished the month down (-3.4%). Similar to the global markets, defensive stocks outperformed and cyclicals performed worst. Energy, Materials, Consumer Discretionary, and Financials underperformed while Industrials, Health Care, IT, Telecomms and Utilities fared best. Small companies marginally underperformed large caps due to the underperformance of small Resources stocks relative to small Industrials. Listed property trusts posted a positive return for the month due to their perceived defensive characteristics. Unlisted property posted a positive return for the month with returns largely reflecting income.

The RBA announced a 0.25% rate cut in early November. Australian 5-year and 10-year government bond yields tightened considerably over the month while bond yields for the Eurozone softened marginally reflecting investor concerns about the fiscal viability of some Euro countries. UK 10-year bonds tightened slightly and US 10-year bonds were relatively flat. Longer duration Australian Government inflation linked bonds were the standout performer. Global credit as measured by the Barclay’s Global Credit Index had a weaker month in hedged $A terms. The 10-year yields of Australian, Euro area, UK and US government bonds remain low having declined since 30 June 2011 by 0.7% to 1.3%.

Subsequent to month end, investment markets surged in response to news that the world's major central banks, being the European Central Bank, Federal Reserve, Bank of England, Bank of Canada, Bank of Japan and the Swiss National Bank, agreed to lower the cost of the existing liquidity swap rates by 0.50%. China cut its reserve rate requirement by 0.50%, the first move in three years, and US jobs data surprised on the upside. Investors should expect volatility to continue for the time being as market sentiment proves to be closely aligned to political and policy announcements.