Equity markets around the world once again saw a lot of volatility in January, but most of them ended the month in positive territory.

This translated into modest gains of less than 2% for most investment funds in Canada with equity or balanced mandates, according to preliminary performance data released Wednesday by Morningstar Canada.

“Spreading unrest, first in Tunisia and then in Egypt, contributed to higher oil prices,” said Esko Mickels, fund analyst for Morningstar Canada. “Concerns grew that protests could spread to larger oil-producing countries and that supplies through the Suez Canal and Sumed oil pipeline could be disrupted. This combined with growing demand to push the price of Brent crude, the international benchmark, beyond the US$100 barrier for the first time since 2008.”

Among major markets, the most profitable one last month was the United States, where the S&P 500 Index gained 2.4% (in U.S. dollar terms) with the help of widespread positive earnings surprises. “Nearly three-quarters of the companies reporting earnings beat analyst estimates,” Mickels said. This, coupled with a 0.8% appreciation of the U.S. dollar versus the Canadian currency, resulted in a 2.6% return for the U.S. equity fund index, placing it in a tie for third best among the 44 Morningstar Canada fund indices.

Funds in the European equity category outperformed their U.S. equity counterparts, with the European equity fund index returning 3.7% for the month and placing second-best overall. However, most of that gain was due to currency effects, with the loonie losing more than 3% against both the euro and the British pound. This also had a positive impact on funds in the international equity category, which typically allocate more than half of their assets to Europe. Canadians who hold European or international equity funds that hedge their currency exposures will likely see flat returns in January.

The best performer among all fund indices in January was the one that tracks the science & technology equity category, which posted a gain of 4.3% thanks to strong earnings from Apple Inc. and Netflix Inc. At the other end, the worst-performing fund index was precious metals equity with a 10.7% loss as gold bullion posted a negative month for the first time since July 2010.

Gold’s decline dragged the broader Canadian market, but not enough to put the S&P/TSX Composite Index in the red thanks to solid performances in the energy and financials sectors.

“The decline in precious metals was outweighed by gains from the likes of Encana Corp., Potash Corp. of Saskatchewan, Inc., Royal Bank of Canada, Suncor Energy, Inc., and Valeant Pharmaceuticals International, Inc., which helped keep the TSX in positive territory in January,” Mickels said. The Canadian Equity Fund Index finished in the middle of the pack with a 1.2% gain.

Final performance figures will be published on next week.