INDICES DASHBOARDFebruary, 2016

Aureliano GentiliniHead of Research

“The opportunity is often lost by deliberating."

– Publilius Syrus (Fl. 85 BC-43 BC)

INDICES DASHBOARD

OVERVIEW

A MIX OF MACRO-RELATED FACTORS AND

DISTURBANCES INFECTED GLOBAL MARKETS IN

JANUARY, WITH A RISK-OFF MOOD PREVAILING

GLOBALLY THROUGHOUT THE MONTH.

Oversupply and low-demand factors in the crude

oil market (with spot prices hitting the USD30

floor), coupled with concerns about economic

growth in China, prompted the worst stock market

decline for an opening week of the year in history.

The global equity and bond markets rallied on the

last trading session of the month after the Bank of

Japan surprised market participants by cutting its

rates into negative territory for the first time. That

did not prevent January from being one of the

worst months since the credit crisis.

»The old adage “when the US catches a cold, theworld gets pneumonia” in January turned into“when China sneezes, the world gets a cold.” Marketreactions observed in January and early Februaryindeed appeared to point to early flu symptoms.

Concerns mounted at the beginning of 2016 asofficial data showed the Chinese manufacturingsector contracting for a fifth month in a row inDecember, 2015. The official PMI reading for theChinese manufacturing sector came in at 49.7 forDecember, marginally increasing above November’sperformance but broadly in line with marketparticipants’ expectations.

Conversely, China’s nonmanufacturing PMI was54.4 for December, up from 53.6 for November,sustained by a rapid increase in e-business-relatedservices. It was noteworthy that the new-ordersindex of the construction industry came in at 55.0,increasing 5.5 percentage points over the previous

month and suggesting that market demand in theconstruction industry had rebounded.

The anticipated tight money market conditionsprompted the People’s Bank of China to announceon Jan. 19, 2016, that it would inject more thanCNY600 billion into the banking system to easeliquidity conditions that are traditionally tight beforethe long Lunar New Year celebrations. Also, amidworries about recent capital outflows, China’sforeign exchange regulator at the beginning ofFebruary loosened restrictions on foreigninvestment in its onshore stock and bond markets,previously subject to individual quotas as part of theQualified Foreign Institutional Investor program.

»In hindsight, the “sell everything except high-qualitybonds" note issued by Britain's RBS in the secondweek of January appears now to not have been amere free handbill.

Deepening further into the red since the 2015 yearend, the EURO STOXX 50® and the STOXX® Europe600 returned negative 6.62% and 6.36% readings,respectively, for January in euro gross-return terms.For the same month, the STOXX® Switzerland TotalMarket Index plunged 7.52% in US-dollar gross-return terms. At the same time, the STOXX® USA900 posted a negative 5.43% performance in US-dollar gross-return terms, while the STOXX® Global1800 and the STOXX® Emerging Markets 1500recorded negative 6.02% and 5.99% readings,respectively, in US-dollar gross-return terms. Afterclosing marginally in the black for December, 2015,Japan ended deeper in the red for January, with theSTOXX® Japan 600 Index returning a negative7.76% in US-dollar gross-return terms. For thesame month, among emerging peers the STOXX®BRIC 100 Index returned a negative 9.30% in US-dollar gross-return terms.

January was the worst month since October, 2008for China's stock markets The STOXX® China ATotal Market Index nosedived 25.85% for Januaryin US-dollar total-return terms, while the STOXX®

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China B Total Market Index returned a negative17.41% in US-dollar total-return terms.

»Currency effects played a significant role forinternational investors at the beginning of the year,since index performances computed in foreigncurrencies were impacted by currency cross-ratedepreciation/appreciation patterns.

Despite tumbling at the beginning of February, hitby weak macro readings and diminishedprobabilities of further rate hikes in 2016, the USdollar managed to appreciate against the majorcurrencies for January. Month on month at the Jan.29 close, the greenback appreciated 0.40% againstthe euro, 3.76% against the sterling, 0.64% againstthe Japanese yen, 2.86% against the Australiandollar and 2.36% against the Swiss franc. At thesame time, the Swiss franc depreciated 1.96%against the euro. Because of the PBOC intervention,the renminbi depreciated 1.31% against the USdollar for January.

A secular stagnation trap may become a self-fulfilling prophecy, should the market slowdowndeepen further over a prolonged period of time. Thecurrent creeping deflationary pattern poses anumber of challenges to central banks to fine-tunea loosening monetary policy. Low real rates will beharder to achieve as deflation takes a firm grip onmarket expectations.

At its January meeting, the European Central Bankraised the prospect of an action in March as gloomamong market participants deepened. Nonetheless,similarly to what was observed in December lastyear, disappointing expectations prevailed afterJanuary’s meeting as ECB President Mario Draghi’sbazooka turned into a squirt gun.

Investors globally are starting to question whethercentral banks’ monetary policies can effectivelycontribute to putting growth and inflation on asustainable footing.

FIGURE 1 CBOE CRUDE OIL VOLATILITY INDEX (MAY 10,

2007-FEB. 3, 2016)

Source: Thomson Reuters Datastream

After declining in January and the first two tradingsessions of February, crude oil prices reboundedthereafter. Both the US benchmark West TexasIntermediate and the Brent rose, buoyed by a weakUS dollar and amid expectations that talks betweenRussia and OPEC on output cuts could fuel pricegains.

The CBOE Crude Oil Volatility Index (OVX, an indexthat measures implied volatility on the light crudeWTI) had climbed since the second week ofJanuary and on Feb. 2, 2016, hit its highest levelsince mid-March 2009. Implied volatility for at-the-money options in the front-month WTI contractrose to about 69% at the Feb. 2 close, an increaseof more than 47 percentage points sinceDecember’s year-end close and 237.1% aboveJanuary, 2014’s month-end reading. (An elevatedOVX value reflects higher prices of options tradedon WTI futures contracts and implies that marketparticipants expect further large price movementsin the near term.)

Additionally, the OVX showed a diverging patternfrom the VIX, with the spread between the twoindices widening after the second half of Januaryand closing on Feb. 2 at its highest value since

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February, 2015, outlining greater uncertaintiesabout future price developments in the oil market.

»The FX markets were still agitated in January by thespecter of a currency war. The US dollar collapsedat the beginning of February, dragged down byweak US macro data and dovish comments byWilliam Dudley, President of the New York FederalReserve, who raised concerns about the tighteningof financial conditions since the Fed raised interestrates in December.

The Institute for Supply Management'snonmanufacturing index declined to a lower-than-expected 53.5 reading for January, 2.3 percentagepoints lower than the seasonally adjusted Decemberfigure of 55.8. January marked its lowest readingsince February, 2014.

According to an advance estimate published by theUS Department of Commerce before the end ofJanuary, US GDP growth for Q4 2015 slowed to0.7%, down from 2.0% for Q3 2015. A GDP growthreading lower than estimated spurred convictionsamong market participants of a slower pace of ratehikes by the US Fed.

The prospect of US-dollar parity with the euro,which was expected to materialize as the monetarypolicy stance on the two sides of the Atlanticstarted to decouple, paused. Both the euro and theJapanese yen recorded safe-haven flights at thebeginning of February amid macro worries.

The US employment situation for January, withtotal nonfarm payroll employment increasing151,000 for the month—a marked decline from the262,000 new jobs created for December—did notsuffice to flag a green light for a March interest ratehike. The key nonfarm payrolls report was expectedto record 190,000 new jobs for January, accordingto the median estimate of a Thomson Reuters pollof economists.

Uncertainty on the pace of a further monetarytightening in 2016 by the US Fed was also reflected

in the futures market implied probabilities. Basedon the CME Group 30-Day Fed Fund futures prices,at 15:00 GMT on Feb. 5, the futures market waspricing a Fed rate hike with an implied probability of9.7% at the Mar. 16, 2016 meeting, 26.9% at theJun. 15, 2016 meeting, 32.0% at the Sep. 21, 2016meeting, and 35.5% at the Dec. 21, 2016 meeting.

After declining from a four-and-a-half month highon Dec. 2, 2015, in the run-up to the ECB’sgoverning council meeting, the one-montheuro/Swiss franc implied volatility—a gauge of thejitters in the FX market and cross rate fluctuations—rose 17.20% since the 2015 year-end at the Feb. 4close. This suggested that markets anticipatedvolatility of the Swiss franc/euro exchange rate wasto increase at the same time as the Swiss NationalBank (SNB) was widely expected to intervene in thecurrency market to sustain a depreciation of theSwiss franc against the euro.

The Swiss franc will be under pressure, since theECB is widely expected to unveil additionalmonetary policy-loosening measures at itsgoverning council meeting in March. As highlightedin a previous edition of the Indices Dashboard, anymove by the SNB will come at the expense ofhigher negative interest rates on sight deposits.Alternatively, an appreciation pattern may becountered by enforcing the alternative (and moreeffective) measure of removing the exemptionthreshold above which negative interest rates onsight-deposit account balances are charged. Thatmeasure may lead to the potential knock-onperverse effect of Swiss banks’ starting to chargenegative rates on retail deposits.

Also, for the first time since October, 2014, the one-month euro/Swiss franc 25-delta risk reversal1

1The 25-delta risk reversal is a portfolio of an out-of-the-money put

and an out-of-the-money call with the same delta, whereby the dealerexchanges one of the options for the other with the counterpart. Givendifferences in the implied volatilities of the put and the call, the dealerpays or receives a premium for exchanging the options. The premiumis expressed as the implied volatility spread at which a 25-delta call isexchanged for a 25-delta put and indicates the skewness of the“volatility smile.” If a 25-delta call trades at a price higher than a 25-delta put, such that the risk reversal is positive, this suggests themarket bets on the foreign currency to appreciate.

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increased from negative to positive, indicating thatmarkets no longer expected the Swiss franc toappreciate against the euro but to depreciate.

The Swiss franc FX rate trading volume peaked atthe end of January and the beginning of February,compared to both December and November. Forthe period Jan. 4, 2016-Feb. 3, 2016, the averagedaily volume of the euro/Swiss franc rate rose28.04% compared to the average daily volume forDecember, 2015.

FIGURE 2 EURO/SWISS FRANC VOLATILITY (SEP. 23,

2010-FEB. 4, 2016)

Source: Thomson Reuters, STOXX calculations

»On the macro front, in Europe the German Ifobusiness climate index dropped to 107.3 forJanuary from a downwardly revised 108.6 forDecember last year. The potential impact arisingfrom the slowdown in emerging markets weighedon business sentiment in the manufacturing sector.

According to a preliminary estimate by the FederalStatistics Office, the German economy expanded1.7% for 2015 (GDP growth was 1.6% for 2014) on

solid household consumption expenditures andhigher government spending.

According to Markit's Purchasing Managers' Index,factory growth in the Eurozone decreased at thebeginning of 2016 as incoming orders languished.Markit's Purchasing Managers' Index for theEurozone manufacturing sector decreased to 52.3from December's 53.2, a reading in line with anearlier flash estimate.

The winter 2016 edition of the EuropeanCommission forecasts released at the beginning ofFebruary highlighted a worsening of the economicconditions in the Eurozone since the autumnprojections. In light of lower growth prospects inemerging markets, the slowdown of the Chineseeconomy and the nosedive of crude oil prices,economic growth in the Eurozone was revised to1.7% for 2016, down from the previous projection at1.8%. For 2017, the commission maintained itseconomic growth forecast of 1.9% growth, rising to2.0% for 2018. The winter forecast also pointed topotential threats to the EU’s growth prospectsarising from political instability in the PIGS countries(Portugal, Italy, Greece and Spain).

At its latest monetary policy meeting, the Bank ofEngland’s (BoE) Monetary Policy Committee keptpolicy rates on hold at the 0.5% record-low levelamid considerations about an “unforgiving globalenvironment and sustained financial marketturbulence.” The BoE expected overall GDP growththis year to come in at 2.2%, down from the 2.5% itexpected in November. Growth for 2017 was alsorevised down from 2.7% to 2.4%. Also, in its latestquarterly inflation report, the BoE trimmed itsinflation forecast for the first quarter of next year toan annual reading of 1.2%, down from the 1.5%projected in November.

On a side note, in the UK the specter of a Brexitscenario fueled early concerns among marketparticipants. According to Citi's projections, a Brexitwould trim 1.0-1.5 percentage points off GDPgrowth forecasts for 2017, 2018 and 2019, for atotal GDP loss of around 4%.

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Realized Volatility 1-mth annualized (left scale)Implied Volatility 1-mth Option ATM (left scale)Spread (right scale)

2.9376.563

3.625

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»In the bond market on both sides of the Atlanticand in Japan, in January and early February yieldcurves factored in additional monetary policy-loosening measures, a deterioration in the macropicture and flight-to-quality drivers. In particular,although being distorted by expectations about ECBactivity, the Eurozone yield curve appeared to entera dangerous flattening cycle.

The US yield curve recorded a modest bullishsteepener for the Dec. 31, 2015-Feb. 4, 2016 periodto the tune of 1 basis point—as measured by theyield differential between the thirty- and two-yearUS benchmarks.

FIGURE 3 US TREASURIES YIELD CURVE (DEC. 31, 2014,

DEC. 31, 2015 AND FEB. 4, 2016)

Source: STOXX calculations on Thomson Reuters data

When compared to the end of December, 2015, theslope of the Eurozone yield curve—as measured bythe yield differential between the thirty- and two-year Eurozone benchmarks—bull-flattened 32 basispoints at the Feb. 4, 2016 close.

FIGURE 4 EUROZONE GOVERNMENT BENCHMARKS

YIELD CURVE (DEC. 31, 2014; DEC. 31, 2015 AND FEB. 4,

2016)

Source: STOXX calculations on Thomson Reuters data

The Japanese yield curve recorded a 3-basis-pointbull flattening for the Dec. 31, 2015-Feb. 4, 2016period—as measured by the yield differentialbetween the thirty- and two-year Japanesegovernment bonds (JGBs).

FIGURE 5 JAPANESE GOVERNMENT BONDS

BENCHMARKS’ YIELD CURVE (DEC. 31, 2014; DEC. 31,

2015 AND FEB. 4, 2016)

Source: STOXX calculations on Thomson Reuters data

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»Crude oil’s deep dive in January stoked subduedinflationary expectations, which continued mutedon both sides of the Atlantic and were wellanchored below respective central banks’ targets.Also, the correlation between the breakeveninflation rate and actual inflation appeared to haveincreased recently.

The euro breakeven inflation rate, i.e., the five-yearforward rate five years ahead (one of the ECB'spreferred measures of market inflationexpectations, showing markets’ expected forecastsfor 2026 inflation to be in 2021) plunged 16 basispoints since the 2015 year-end to a 12-month lowof 1.5123% on Feb. 1, 2016.

On the other side of the Atlantic, the five-yearbreakeven US inflation rate marginally recoveredfrom a four-month low of 1.08% recorded on Jan.21 to a 1.20% reading on Feb. 1.

FIGURE 6 INFLATION EXPECTATIONS, US VERSUS

EUROZONE (DEC. 12, 2012-FEB. 1, 2016)

Source: FRED® and Thomson Reuters

»Leveraging on troubles affecting the Europeanbanking sector, the STOXX® Europe 600 BanksDaily Short Index outperformed the “plain-vanilla”bank sector benchmark for January.

According to Fitch data, European banks' CDS havebeen widening since the start of the year on macroconcerns, widening 36% on average and 12% onaverage just in the last week of January.In Italy, the securitization structure schemeconceived to tackle the level of Italian banks’nonperforming loans outstanding, which totaledEUR201 billion at the end of November, 2015,appeared not to offer a viable solution to theburden of nonperforming exposures.

In Portugal, private bondholders teamed up,engaging in confrontation against a recent centralbank transfer of nearly EUR2 billion of “good bank”Novo Banco to "bad bank" Banco Espirito Santo.

The Deutsche Bank posted record losses to the tuneof EUR6.8 billion as its revenue performancefaltered in a near-zero interest-rate environment,exacerbated by a slump in oil prices and investors’worries about slowing growth in China.

Under the current market scenario, the threecatalysts that can help to buoy margin profitabilityfor the European banking sector—i.e., cost cuts, badloan reductions and rate hikes—will materialize onlybeyond the short term. Also, the STOXX short bankindex continued to factor in market disappointmentsince the ECB’s policy measures announcement onDec. 3 as well as a number of uncertaintiessurrounding the European banking sector. Itreturned 22.25% in euro gross-return terms for theDec. 31, 2015-Feb. 4, 2016 period. Conversely, forthe same period, the STOXX® Europe 600 BanksIndex posted a negative 19.66% in euro gross-return terms.

As we highlighted in a previous edition of thisreport, in the current market scenario wherecorporate earnings announcements mightdisappoint analysts’ estimates, risk-consciousinvestors are better off allocating to minimum-

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variance portfolios. Corporate America struggled inQ4 2015, with many firms missing their salestargets and cost cuts being the only variablesustaining profit margins. For the US market,Standard & Poor’s has shown that—with 56% of Q42015 earnings reported before the end of January—70.9% of issues beat estimates, but only 39.9%beat “as reported” (GAAP) earnings estimates andonly 47.4% beat sales estimates.

Of 77 companies on the STOXX Europe 600 thatreported Q4 2015 earnings by February 5 at 15:00CET, 31% of issues beat analysts’ estimates. In atypical quarter (since 2011), 49% of companies beatestimates, 8% matched and 43% missed estimates,according to Thomson Reuters Starmine data.

FIGURE 7 THOMSON REUTERS I/B/E/S ESTIMATES,

TOTAL EPS EARNINGS FOR THE CURRENT

CALENDARIZED FISCAL YEAR (REBASED INDEXED

WEEKLY DATA, FEB. 1, 2011-FEB. 2, 2016)

Source: Thomson Reuters Datastream

As highlighted in Figure 7 above, based on themost recent Thomson Reuters I/B/E/S estimates atthe Feb. 2, 2016 close, total US S&P 500 earningsfor the current calendarized fiscal year are expectedto be 0.73% lower than those forecasted at thebeginning of December, 2015. Similar estimates for

TOPIX (in Japan the fiscal year ends on Mar. 31),EURO STOXX and EURO STOXX 50 total earningsshow growth rates 0.17%, 0.47% and 2.32% lower,respectively, than the beginning-of-Decemberforecast.

In the current market context where price dynamicsare sensitive to information arrival linked tofundamentals, any deterioration in the pace ofcorporate earnings might favor minimum-varianceportfolios. That is in light of a mean-reversion effecttriggered by an overestimation of the length of theearnings trend. In fact, those companies that aremore profitable in a given reporting period mightsubsequently lose their profitability, since in manycases success stories cannot be sustainedindefinitely. In particular, growth stocks appear tobe affected by this bias, since their market pricesfactor in expectations of long-term profitability.

Sector allocation strategies—in addition to beingdriven by economic cycle-related factors andfundamentals—will remain sensitive to safe-havendrivers and corporate earnings expectations as wemake advances in the reporting season in the newyear. Prices will continue to reflect “buy the rumorsand sell the news” patterns, triggered by earnings-surprise/earnings-disappointment factors, bottom-fishing strategies and speculations about M&Apotential targets.

Despite recording negative returns at the beginningof the year, the constrained and unconstrainedversions of the STOXX Europe 600 MinimumVariance Index® outperformed the STOXX Europe600 benchmark by 228 basis points and 331 basispoints, respectively, for January, 2016.Outperformance of the STOXX Europe 600Minimum Variance Index—for both the constrainedand unconstrained versions—against the STOXXEuropean benchmark stood at 758 basis points and1,236 basis points, respectively, for the one-yearperiod ended Jan. 29, 2016.

Similarly, the constrained and unconstrainedversions of the STOXX USA 900 Minimum VarianceIndex® outperformed the STOXX USA 900®benchmark by 344 basis points and 533 basis

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EURO STOXX 50 EURO STOXX

TOPIX S&P 500 COMPOSITE

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points, respectively, for January, 2016.Outperformance of the STOXX USA 900 MinimumVariance Index—for both the constrained andunconstrained versions—against the STOXX USbenchmark stood at 336 basis points and 701 basispoints, respectively, for the one-year period endedJan. 29, 2016.

»Volatility patterns for January ended on a highernote on the two sides of the Atlantic. However, thepace of the monthly increase was different betweenthe two key implied volatility indices.

While implied volatility in the US stock markets asmeasured by the CBOE VIX edged up 10.93% forJanuary, the VSTOXX climbed a higher 23.55% atthe end of the month. The pace of growth alsostayed on a rising pattern at the beginning ofFebruary. Keeping pace with historical patterns, theVSTOXX continued to trade at a premium to theVIX.

For the Dec. 31, 2015-Jan. 29, 2016 period, tradingsessions of higher day-on-day implied volatility as apercentage of overall trading sessions amounted to45.0% for both the VIX and the VSTOXX. Impliedvolatility patterns appeared to decouple in US andEuropean stock markets for the one-year periodended Jan. 29, 2016. Year on year at the Jan. 29close, the CBOE VIX decreased 3.67%, while theVSTOXX increased 10.76%.

For the Jan. 30, 2015-Jan. 29, 2016 period, tradingsessions of higher day-on-day implied volatility as apercentage of overall trading sessions amounted to44.23% for the VIX and 45.77% for the VSTOXX.

»Despite a handful of bright spots in the emergingworld, both emerging and developed marketsended deeply in the red in the January performanceleague table.

Among emerging markets, Thailand held the topspot in the performance league table for January.

Hungary was the runner-up for the same month.After holding the top spot in the performanceleague table for December, Egypt—bettered byGreece—bottom-performed for January.

Year-on-year performance at the Jan. 29, 2016close confirmed the picture portrayed in Q4 2015,with Hungary holding the top spot in the emerging-countries performance league table and Russiabeing the runner-up. Conversely, Brazil—bettered byGreece—bottom-performed for the one-year periodended Jan. 29, 2016.

Among developed markets, Canada—althoughposting a negative return—top-performed forJanuary. Finland was the runner-up in the monthlyperformance league table. Italy, bettered byLuxembourg, bottom-performed for January. Theperformance of the southern European country wasdragged down by uncertainties about economicgrowth prospects and doubts about thesecuritization structure scheme conceived to tacklethe level of banks’ nonperforming loansoutstanding, which totaled EUR201 billion at theend of November, 2015.

Year-on-year performance at the end of Januaryconfirmed December 2015’s picture. Ireland heldthe top spot among the developed peers, withDenmark ranking second in the annualperformance league table. At the bottom of theannual performance league table, January featureda picture similar to the one observed for Q4 2015.Luxembourg, bettered by Singapore, confirmed itsnegative momentum, bottom-performing for thetwelve-month period ended Jan. 29.

»After posting a negative 1.97% for December, 2015,the STOXX USA 900 Price Index returned anegative 5.53% for January. The STOXX USA 900Price Index on Jan. 29, 2016, ended 10.37% belowthe multi-year-record closing high at 161.35 on May21, 2015.

The STOXX Europe 600 Price Return Index and theEURO STOXX 50 Price Return Index dropped

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6.43% and 6.81% month on month, respectively,while the DAX lost 8.79% for January. At the Jan.29, 2016 market close, the STOXX Europe 600Price Index plunged 17.34% below the all-time highof 414.06 posted on Apr. 15, 2015. Similarly, on Jan.29, 2016, the DAX closed 20.82% below its all-timerecord high posted on Apr. 10, 2015, at 12,374.73.

Erasing its positive one-year performance posted atthe end of December, the wide Europeanbenchmark returned a negative 6.75% price returnyear on year at the Jan. 29, 2016 close. For thesame period, the EURO STOXX 50 Price ReturnIndex and the DAX posted a negative 9.14% and anegative 8.38%, respectively.

The European benchmarks’ performance year onyear at the Jan. 29, 2016 close compared to pricereturns of minus 4.08% for the STOXX USA 900and positive 0.86% (in Japanese-yen terms) for theSTOXX Japan 600. For January, the US and Japanbenchmarks posted negative 5.53% and negative7.17% returns in US-dollar and Japanese-yen price-return terms, respectively.

»In performance-contribution terms, the negativeperformance of financials (-2.13%), health care (-1.0%) and industrials (-0.81%) detracted the mostfrom the performance of the STOXX Global 1800Index for December (-6.02% in US-dollar total-return terms).

More defensive sectors such astelecommunications (+0.03%), bettered by utilities(+0.05%), ranked at the top of the performance-contribution league table for January.

At the country level, the United States (-2.92%),Japan (-0.86%) and the United Kingdom (-0.49%)detracted the most from the monthly performancefor January.

»The STOXX USA 900 Index returned for January anegative 5.43% in US-dollar total-return terms.

Sector contribution to monthly performancefactored in macro information arrival anduncertainties about the pace of the interest ratetightening by the US Fed in 2016. Resembling thepattern observed for the STOXX® Global 1800Index, the monthly performance of the STOXX®USA 900 Index for January was sustained the mostby utilities (+0.16%) and telecommunications(+0.15%). Conversely, financials (-1.59%), healthcare (-1.19%) and technology (-0.89%) detractedthe most from monthly performance for January.

»In performance-contribution terms, financials(-2.83%), health care (-0.89%) and basic materials(-0.67%) detracted the most from the return of theSTOXX Europe 600 Index for January (-6.36% intotal-return terms). For the European benchmark,despite posting a negative return contribution, theoil & gas sector (-0.07%)—bettered byutilities (-0.05%)—top-performed.

At the country level, the UK (-1.61%) and Germany(-1.13%) held the bottom spots in the performance-contribution league table for January. Jersey (with amarginal 0.01% contribution) was the only countrypositively contributing to monthly performance.

“The opportunity is often lost by deliberating."

– Publilius Syrus (Fl. 85 BC-43 BC)

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FIGURE 8 SELECTED STOXX AND IMPLIED VOLATILITY INDICES’ PERFORMANCE AT JAN. 29, 2016

Source: STOXX (all performance figures are in US-dollar terms whenever it is specified in the index name, in euro terms in the remaining cases. Performance

figures of the volatility indices are computed in their respective currency of denomination.)

Index Name 1-Mth Performance 3-Mths Performance 1-Yr Performance

EURO STOXX 50 - TOTAL RETURN INDEX -6.62% -10.51% -6.15%

EURO STOXX TMI REAL ESTATE INVESTMENT & SERVICES USD - PRICE INDEX -4.49% -8.51% -4.60%

EURO STOXX TOTAL MARKET REITs USD - PRICE INDEX -2.04% -9.13% -9.74%

STOXX AFRICA 90 USD - TOTAL RETURN INDEX -4.79% -19.29% -30.32%

STOXX ASEAN-FIVE SELECT DIVIDEND 50 USD - TOTAL RETURN INDEX -3.88% -6.00% -18.94%

STOXX ASIA 600 MINIMUM VARIANCE USD - TOTAL RETURN INDEX -4.33% -2.96% 0.99%

STOXX ASIA 600 MINIMUM VARIANCE UNCONSTRAINED USD - TOTAL RETURN INDEX -4.80% -4.36% -3.64%

STOXX ASIA/PACIFIC 600 USD - TOTAL RETURN INDEX -7.99% -7.95% -5.96%

STOXX ASIA/PACIFIC 600 EX JAPAN USD - TOTAL RETURN INDEX -8.40% -7.29% -16.03%

STOXX AUSTRALIA TOTAL MARKET USD - TOTAL RETURN INDEX -8.09% -4.35% -14.96%

STOXX BRIC 100 USD - TOTAL RETURN INDEX -9.30% -13.18% -19.96%

STOXX CHINA A-SHARES TOTAL MARKET USD - TOTAL RETURN INDEX -25.85% -22.16% -12.32%

STOXX CHINA B-SHARES TOTAL MARKET USD - TOTAL RETURN INDEX -17.41% -4.04% 8.08%

STOXX CHINA TOTAL MARKET USD - TOTAL RETURN INDEX -12.92% -16.31% -19.16%

STOXX EASTERN EUROPE TOTAL MARKET USD - PRICE INDEX -3.18% -12.63% -13.76%

STOXX EMERGING MARKETS 1500 USD - TOTAL RETURN INDEX -5.99% -10.90% -18.87%

STOXX EUROPE 600 - TOTAL RETURN INDEX -6.36% -8.53% -3.84%

STOXX EUROPE 600 MINIMUM VARIANCE - TOTAL RETURN INDEX -4.08% -5.27% 3.75%

STOXX EUROPE 600 MINIMUM VARIANCE UNCONSTRAINED - TOTAL RETURN INDEX -3.05% -2.28% 8.52%

STOXX EUROPE ESG LEADERS 50 - TOTAL RETURN INDEX -7.20% -10.28% -6.65%

STOXX EUROPE LARGE 200 - TOTAL RETURN INDEX -6.06% -8.82% -5.18%

STOXX EUROPE SMALL 200 - TOTAL RETURN INDEX -8.08% -7.83% 0.01%

STOXX EUROPE STRONG BALANCE SHEET - TOTAL RETURN INDEX -5.06% -4.66% 1.47%

STOXX GLOBAL 1800 USD - TOTAL RETURN INDEX -6.02% -7.94% -4.36%

STOXX GLOBAL 1800 MINIMUM VARIANCE USD - TOTAL RETURN INDEX -2.14% -2.85% 1.42%

STOXX GLOBAL 1800 MINIMUM VARIANCE UNCONSTRAINED USD - TOTAL RETURN INDEX -1.92% -2.74% -0.02%

STOXX GLOBAL BROAD INFRASTRUCTURE USD - TOTAL RETURN INDEX -1.35% -5.65% -7.56%

STOXX GLOBAL ESG LEADERS USD - TOTAL RETURN INDEX -6.42% -9.48% -8.97%

STOXX GLOBAL SELECT DIVIDEND 100 USD - TOTAL RETURN INDEX -3.28% -3.68% -5.30%

STOXX INDIA TOTAL MARKET USD - TOTAL RETURN INDEX -7.54% -8.53% -16.20%

STOXX JAPAN 600 USD - TOTAL RETURN INDEX -7.76% -8.08% -0.64%

STOXX JAPAN 600 MINIMUM VARIANCE USD - TOTAL RETURN INDEX -2.17% -1.60% 4.07%

STOXX JAPAN 600 MINIMUM VARIANCE UNCONSTRAINED USD - TOTAL RETURN INDEX -0.88% 0.02% 4.73%

STOXX LATIN AMERICA TOTAL MARKET USD - TOTAL RETURN INDEX -5.61% -13.82% -30.24%

STOXX NORTH AMERICA 600 MINIMUM VARIANCE USD - TOTAL RETURN INDEX -1.45% -2.41% 1.33%

STOXX SWITZERLAND TOTAL MARKET USD - TOTAL RETURN INDEX -7.52% -9.33% -6.59%

STOXX UK TOTAL MARKET USD - TOTAL RETURN INDEX -6.55% -11.65% -10.56%

STOXX USA 900 USD - TOTAL RETURN INDEX -5.43% -6.85% -2.08%

STOXX USA 900 MINIMUM VARIANCE USD - TOTAL RETURN INDEX -1.99% -2.05% 1.27%

STOXX USA 900 MINIMUM VARIANCE UNCONSTRAINED USD - TOTAL RETURN INDEX -0.09% 1.96% 4.93%

STOXX USA STRONG BALANCE SHEET USD - TOTAL RETURN INDEX -4.77% -5.61% 1.14%

STOXX USA TOTAL MARKET SMALL USD - TOTAL RETURN INDEX -6.94% -10.38% -10.60%

VSTOXX VOLATILITY INDEX - PRICE INDEX 23.55% 34.53% 10.76%

CBOE SPX VOLATILITY VIX - PRICE INDEX 10.93% 34.04% -3.67%

CBOE CRUDE OIL VOLATILITY INDEX - PRICE INDEX 32.83% 47.46% 5.53%

INDICES DASHBOARD

Page 12

FIGURE 9 STOXX EUROPE 600 INDEX SECTOR TOTAL RETURN (EUR, ONE MONTH, THREE MONTHS AND ONE YEAR AT JAN.

29, 2016)

Source: STOXX

FIGURE 10 STOXX USA 900 INDEX SECTOR TOTAL RETURN (USD, ONE MONTH, THREE MONTHS AND ONE YEAR AT JAN.

29, 2016)

Source: STOXX

-20.00% -16.00% -12.00% -8.00% -4.00% 0.00% 4.00% 8.00% 12.00%

Index

Basic Materials

Consumer Goods

Consumer Services

Financials

Health Care

Industrials

Oil & Gas

Technology

Telecommunications

Utilities

-5.43%

-10.73%

-1.86%

-5.32%

-8.43%

-8.28%

-5.56%

-3.13%

-5.63%6.23%

4.89%

-6.85%

-13.81%

-2.13%

-6.77%

-8.65%

-7.17%

-7.06%

-13.52%

-7.79%6.36%

4.61%

-2.08%

-17.53%5.55%

4.23%

-2.29%

-3.39%

-3.72%-19.89%

-0.16%10.92%

-2.46%

1 Month 3 Months 1 Year

-24.00% -20.00% -16.00% -12.00% -8.00% -4.00% 0.00% 4.00% 8.00%

Index

Basic Materials

Consumer Goods

Consumer Services

Financials

Health Care

Industrials

Oil & Gas

Technology

Telecommunications

Utilities

-6.36%

-10.27%

-3.43%

-4.57%

-12.01%

-6.75%

-5.01%

-1.67%

-3.30%

-2.83%

-1.33%

-8.53%-17.03%

-4.91%

-7.01%

-14.68%

-6.96%

-5.46%

-8.03%

-0.77%

-5.20%

-3.60%

-3.84%

-22.36% 3.48%

0.83%

-8.69%

-0.12%

-2.17%

-6.97% 6.96%

-0.38%

-5.12%

1 Month 3 Months 1 Year

INDICES DASHBOARD

Page 13

FIGURE 11 STOXX EUROPE 600 INDEX–DOMICILE-

COUNTRY PERFORMANCE CONTRIBUTION VERSUS

AVERAGE WEIGHTING (EUR, JANUARY, 2016)

Source: STOXX

FIGURE 12 STOXX EUROPE 600 INDEX–INDUSTRY-

SECTOR PERFORMANCE CONTRIBUTION VERSUS

AVERAGE WEIGHTING (EUR, JANUARY, 2016)

Source: STOXX

-0.04

-0.03

-0.05

0.00

-0.01

0.00

-0.12

-0.04

-0.62

-1.13

-0.01

-0.17

0.00

-0.51

0.01

-0.01

-0.03

0.00

0.00

-0.16

-0.03

-0.01

-0.02

-0.34

-0.34

-1.07

-1.61

-0.02

0.26

0.30

2.18

0.05

0.03

0.07

2.95

1.65

14.98

13.29

0.07

1.7

0.03

3.51

0.11

0.05

0.37

0.03

0.02

4.24

0.79

0.23

0.13

4.71

4.46

14.79

28.87

0.13

-5.00 0.00 5.00 10.00 15.00 20.00 25.00 30.00

Australia

Austria

Belgium

Bermuda

Chile

Czech Republic

Denmark

Finland

France

Germany

Greece

Ireland

Isle of Man

Italy

Jersey

Jordan

Luxembourg

Malta

Mexico

Netherlands

Norway

Portugal

South Africa

Spain

Sweden

Switzerland

United Kingdom

United States

Average Weight Country Contribution

Total: -6.36%

-0.67

-0.61

-0.35

-2.83

-0.89

-0.64

-0.07

-0.12

-0.13

-0.05

6.29

18.90

7.87

22.47

13.19

12.87

5.53

3.95

4.84

4.09

-5.00 0.00 5.00 10.00 15.00 20.00 25.00

Basic Materials

Consumer Goods

Consumer Services

Financials

Health Care

Industrials

Oil & Gas

Technology

Telecommunications

Utilities

Average Weight Sector Contribution

Total: -6.36%

INDICES DASHBOARD

Page 14

FIGURE 13 STOXX GLOBAL 1800 INDEX–DOMICILE-

COUNTRY PERFORMANCE CONTRIBUTION VERSUS

AVERAGE WEIGHTING (USD, JANUARY, 2016)

Source: STOXX

FIGURE 14 STOXX GLOBAL 1800 INDEX–INDUSTRY-

SECTOR PERFORMANCE CONTRIBUTION VERSUS

AVERAGE WEIGHTING (USD, JANUARY, 2016)

Source: STOXX

-0.23

-0.01

-0.01

0.00

-0.03

0.00

0.00

0.00

-0.03

-0.01

-0.17

-0.31

0.00

-0.11

-0.08

0.00

-0.01

-0.14

-0.86

0.00

0.00

-0.01

0.00

0.00

0.00

-0.04

0.00

-0.01

0.00

-0.04

-0.01

-0.09

-0.1

-0.31

0.00

-0.49

-2.92

2.72

0.08

0.56

0.06

2.50

0.01

0.03

0.02

0.76

0.43

3.86

3.42

0.02

1.18

1.22

0.01

0.05

0.90

10.56

0.03

0.01

0.09

0.03

0.01

0.01

1.09

0.07

0.2

0.06

0.48

0.03

1.21

1.18

4.04

0.01

7.79 55.27

-20.00 0.00 20.00 40.00 60.00

Australia

Austria

Belgium

Bermuda

Canada

Chile

China

Czech Republic

Denmark

Finland

France

Germany

Greece

Hong Kong

Ireland

Isle of Man

Israel

Italy

Japan

Jersey

Jordan

Luxembourg

Macau

Malta

Mexico

Netherlands

New Zealand

Norway

Portugal

Singapore

South Africa

Spain

Sweden

Switzerland

Thailand

United Kingdom

United States

Average Weight Country Contribution

Total: -6.02%

-0.41

-0.43

-0.61

-2.13

-1.00

-0.81

-0.15

-0.56

0.03

0.05

3.80

14.09

12.28

21.09

12.82

12.55

5.60

10.68

3.73

3.36

-5.00 0.00 5.00 10.00 15.00 20.00 25.00

Basic Materials

Consumer Goods

Consumer Services

Financials

Health Care

Industrials

Oil & Gas

Technology

Telecommunications

Utilities

Average Weight Sector Contribution

Total: -6.02%

INDICES DASHBOARD

Page 15

FIGURE 15 STOXX USA 900 INDEX–DOMICILE-COUNTRY

PERFORMANCE CONTRIBUTION VERSUS AVERAGE

WEIGHTING (USD, JANUARY, 2016)

Source: STOXX

FIGURE 16 STOXX USA 900 INDEX–INDUSTRY-SECTOR

PERFORMANCE CONTRIBUTION VERSUS AVERAGE

WEIGHTING (USD, JANUARY, 2016)

Source: STOXX

0.00

-0.01

0.01

-0.05

-0.02

0.00

0.00

-0.01

-0.03

-0.08

-5.24

0.02

0.26

0.03

1.32

0.09

0.04

0.01

0.05

0.44

0.55

97.19

-10.0 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0100.0

Argentina

Bermuda

Canada

Ireland

Israel

Netherlands

Peru

Sweden

Switzerland

United Kingdom

United States

Average Weight Country Contribution

Total: -5.43%

-0.25

-0.18

-0.76

-1.59

-1.19

-0.69

-0.19

-0.89

0.15

0.16

2.16

11.05

14.48

18.25

14.18

12.23

6.09

15.83

2.44

3.29

-5.00 0.00 5.00 10.00 15.00 20.00

Basic Materials

Consumer Goods

Consumer Services

Financials

Health Care

Industrials

Oil & Gas

Technology

Telecommunications

Utilities

Average Weight Sector Contribution

Total: -5.43%

INDICES DASHBOARD

Page 16

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