The latest developments in financial markets
Written and accurate as at: Sep 19, 2017 Current Stats & Facts
Australian shares
The S&P ASX200 Accumulation Index rose by 0.7% after a volatile reporting season in August. Resources gained 5.5%, continuing their trend of outperforming broader Industrials which posted a 0.25% loss. Small cap stocks also outperformed their larger counterparts with a 2.7% return in August. Over the past 12 months, the S&P ASX200 has returned 9.8%. Sector performance was extremely skewed with Energy (+5.7%) the best performing sector as profit results beat expectations and drove earnings upgrades, while Telco’s (- 7.4%) ended the month significantly lower as Telstra lost 10.5% after it cut its dividend and other peers suffered. Other strongly performing sectors were Industrials (+4.6%) and Consumer Staples (+5.3%). The other poorly performing sectors were Financials (-2.2%) given CBA’s scandal and Consumer Discretionary (-1.5%). Best performing stocks in the top 100 were Treasury Wine (+19.9%), Northern Star (+19.8%) and Alumina (+14.4%). Worst performing stocks were Vocus (-33.81%), Domino’s Pizza (-18.2%) and Bluescope Steel (-17.5%).
International shares
International shares were largely positive despite concerns over North Korea as the MSCI ACWI index returned 0.4%. The best performing sector in Europe and globally was Utilities, although in the US the Technology sector narrowly outperformed Utilities, The S&P500 increased by 0.3%, its fifth straight monthly gain despite Hurricane Harvey, and the Nasdaq rose 1.6% as Tech and Utilities were the standout sectors in the US. European markets were mixed as France’s CAC fell 0.2% while the German DAX dived by 0.5%. In contrast, the UK’s FTSE gained 1.6%. Looking to Asia, the Shanghai Composite rose 2.5% and Hong Kong’s Hang Seng Index was 2.3% higher. On the negative side of the ledger, Singapore slipped 1.6% and Japan’s Nikkei fell 1.4%. Emerging markets (+2.1%) outperformed developed markets (+0.4%) to highlight EM’s continued outperformance YTD (+13.1% over ACWI in USD). Broadly, we also saw Growth and Large Caps continue to outperform Value and Small Caps, by 1.6% and 0.3% excess return respectively. The only exception was Europe where Small Caps outperformed by 0.5%.
Fixed Interest and Cash
The past month saw US 10-year yields down 18 basis points (bps) to 2.12%, although in Australia the 10-year government bond yield ended August 3 bps higher at 2.71%. Markets continue to price in another US fed rate hike in the next 12 months but with reduced conviction. Also, the first ECB hike has been pushed out to May 2019. It was generally a risk-off environment as US High Yield had a -0.67% excess return compared to US 10-year government bond yields. Global investment grade returned 0.6% as Global High Yield returned 0.2%.
Property
Global real estate posted a 1.2% return as investors sought the safety of bond proxies such as real estate and Utilities. Australian property trusts posted returns in line with their international counterparts and outperformed the broader Australian share market gaining 1.2%. Profit results were in line with expectations and FY18 guidance was relatively upbeat, as strong growth in the office sector offset continued weakness in retail property.
Currency and commodities
The Australian dollar remained strong at US$0.7946 at month end after better than expected economic data. The US dollar weakened against the Yen and Euro with the US dollar falling 0.4% over the month. Commodity prices were broadly lower with the S&P GSCI down 0.8%. Precious metals however gained 4.0% given geopolitical tensions. The standouts were Industrial metals, gaining 8.6% as a group, with Nickel up 15.5%, Zinc 12.8%, Aluminum 10.7% and Copper 6.5%.