Crude oil continued its slide this week, pausing around $55/barrel. The decline in crude has led to many positive gains for the economy. Chiefly, the decrease in gasoline prices has been a boon to consumers. The consumer price index (CPI) fell 0.3% this month, the most since December 2008. Many traders expect guidance from the Federal Reserve, which is set to release minutes from its meeting today.

Internationally, crude’s price drop has initiated first steps toward capital controls in Russia as the Ruble fell over 20% this week. The Central Bank of Russia raised rates in a surprise announcement Tuesday. Gold prices retreated slightly, settling around $1195/oz in morning trading, nearly flat for the year.

“Lower energy prices and overall lower inflationary pressure continue to have positive effects for the US economy, and this looks to continue into 2015,” said Dave Gedeon, Vice President, Nasdaq Global Indexes.

INDEX MOVES THIS WEEK

• NASDAQ BIOTECHNOLOGY INDEX (NBI) is down 2.26% since Friday’s close. Year-to-date performance for the index is up 30.7%.
• NASDAQ GLOBAL OIL & GAS INDEX (NQG0001) is up 4.14% since Friday’s close. Year-to-date performance for the index is down 19.4%.
• NASDAQ INTERNATIONAL DIVIDEND ACHIEVERS (DAT) is up 0.63% since Friday’s close. Year-to-date performance for the index is down 6.5%.

INDEX TO WATCH

• The Nasdaq US Large Cap Index (NQUSL) is a float adjusted market capitalization-weighted index designed to track the performance of securities in Nasdaq US Benchmark Index that comprise the Large-cap segment of companies. Currently, the index contains 427 components. Additional disposable income created by the slide in crude may increase activity in this index. It has increased 6.41% year-to-date.

The Spaulding Group, the leading performance measurement service firm in the money management industry, today announced the launch of the “Custodian Guidelines for Transparency in Benchmark Cost” in partnership with BNY Mellon, State Street and Northern Trust. The “Guidelines” were developed with the goal to improve transparency on embedded fees for benchmark data, and enable investors to make informed decisions by understanding the details behind the fees they are paying.

“The ever-increasing cost of benchmark data has been an issue that has grown in importance every year. It has been a major theme of our Performance Measurement Forums, and a hot topic of discussion at our annual Performance Measurement, Attribution and Risk conferences and in our surveys,” said David Spaulding, Founder and CEO of The Spaulding Group.

The Spaulding Group worked closely with three participating custodian banks to create a set of principles that the industry should abide by in order to increase awareness of the costs associated with indexes. This list of best practices is designed to lead to further efficiencies in the asset management industry by ultimately lowering fees paid by end-clients, predominantly asset owners.

In conjunction with the adoption of the “Guidelines," Nasdaq has agreed to license its Nasdaq Global Index Family at no cost to custodian banks that abide by the guidelines set forth by The Spaulding Group and will be offered by BNY Mellon, State Street, and Northern Trust as a low-cost reporting option.

Banks can join by publicly acknowledging they will abide by the principles that have been outlined.

“As the industry examines the fees associated with benchmarks, Nasdaq is focused on providing low-cost indexes that span geographies and asset classes,” said John Jacobs, Executive Vice President, Global Information Services at Nasdaq. “We are excited to offer our Global Index Family to these custodian banks, as they work to increase transparency on the cost of index data. We applaud the work done by The Spaulding Group, BNY Mellon, State Street, and Northern Trust to bring this key issue to the forefront of the asset management industry.”

A whitepaper focused on benchmarks will appear in the Spring issue of The Journal of Performance Measurement, co-authored by The Spaulding Group, BNY Mellon, State Street and Northern Trust.

For more information on the Spaulding Group’s “Guidelines for Transparency in Benchmark Cost," and full transcript of the custodian bank interviews, click here. To be contacted by a member of our team, please click here.
 

The precipitous decline in crude oil prices continued this week as OPEC maintained current production levels. WTI Crude contracts slid 10.2% on Friday, as market prices converge toward domestic producers’ break-even production costs.

While the slide in crude prices may be hurting domestic tight oil producers, this move is seen as a boon to the overall domestic economy. 208,000 jobs were added in November according to the recent ADP report, continuing a recovery trend which began after the recession ended in 2013. US auto sales increased 4.6% last month as lower gasoline prices spurred demand. Gold prices turned slightly positive for the year, settling around $1210/oz in morning trading.

“Despite lackluster Black Friday sales, lower energy prices are providing a cushion to the domestic economy in several different areas including job creation, transportation, and production,” said John Jacobs, Executive Vice President, Nasdaq Global Indexes.

INDEX MOVES THIS WEEK

• NASDAQ BIOTECHNOLOGY INDEX (NBI) is up 0.80% since Friday’s close. Year-to-date performance for the index is up 35.1%.
• PHLX UTILITY SECTOR (UTY) is up 0.15% since Friday’s close. Year-to-date performance for the index is up 20.04%
• NASDAQ GLOBAL GOLD & PRECIOUS METALS (QGLD) is up 5.19% since Friday’s close. Year-to-date performance for the index is down 8.2%.

INDEX TO WATCH

• The NASDAQ Global Oil & Gas Index (NQG0001) follows the general oil and gas industry and includes 479 securities from developed and emerging markets. The largest companies by float adjusted market cap are Exxon Mobil, Chevron, Royal Dutch Shell and BP. OPEC supply remaining steady may affect market volatility and create movement in this index.

Recently Rob Hughes, Vice President/Head of Index and Advisor Solutions, traveled to Hong Kong to focus on several Asia-Pacific initiatives, including the Hong Kong-Shanghai Connect program.

Launched on November 17th, the Hong Kong-Shanghai Connect initiative allows mainland investors to buy Hong Kong-listed equities directly and waives the need for investment licenses. The program is expected to strengthen the two cities’ roles as global financial centers and open the door for foreigners to a $4.2 trillion pool of capital.

During an interview with Bloomberg TV’s Rishaad Salamat, Hughes discussed the implications of the Shanghai-Hong Kong Stock Connect for U.S. investors and the Indexing business. “As soon as the stock connect program hit the wires, ETF sponsors in the U.S. and Europe were calling and asking what we are going to do in Hong Kong, and how can they approach the market,” he commented. Hughes also sees a tremendous amount of growth potential for ETFs in Hong Kong, and for China retail investors, accessing global ETFs in Hong Kong is a new opportunity. View the Bloomberg Interview.

Hughes also met with Fund Selector Asia, providing additional commentary. “A new access point to the A-share market creates tremendous interest in the developed world. Retail and institutional investors are interested, brokerages may want to open here, ETF managers can maybe run an ETF here. Don’t underestimate how much interest there is in access to Chinese markets." Hughes commented that the local ETF market has room to grow, as retail investors account for just 20 percent of the market, as compared to more than 50 percent in the United States.

Nasdaq Global Indexes will continue to closely monitor this initiative, as well as other opportunities in the Asia-Pac market as we firmly believe this is market poised for growth. To view a list of our current index-related ETFs listed in Asia, click here. For more information on the Connect program, view the Nasdaq corporate blog, Everything You Need to Know: Shanghai-Hong Kong Stock Connect.

The PHLX Housing Sector is November's top performer at 8.0% and the NASDAQ Commodity Crude Oil ER Index is the worst performer of November at -17.8%. Get a quick overview of Nasdaq Index performance data for our top 50 most watched indexes here.