Developments in financial markets
Written and accurate as at: Dec 16, 2021 Current Stats & Facts
Australian shares
Australian markets were slightly down this month as the ASX300 Accumulation returned -0.53%. After a strong October of earnings, most sectors within the ASX300 were down this month. Materials were up (+5.98%) spurred on by stabilisation in the Chinese property sector and corresponding increased demand for Iron Ore. Telecommunications (+4.66%) and Consumer Staples (+4.13%) also both had positive performance through November. Financials were down (- 6.90%) with the major banks experiencing ongoing margin compression. Furthermore, Energy was down (- 7.82%) due to Omicron fears as well as supply/demand imbalances. These were the worst two performing sectors in the Australian market over November.
International shares
Overall, global markets experienced weak performance this month. After a very solid October, US Markets finished fairly flat this month with the S&P returning -0.69%, the NASDAQ +0.33% and the Dow Jones -3.50%. These average returns were spurred on by Omicron fears towards the end of the month. Europe had a weaker run than the US given the worsening. COVID-19 situation and increased restrictions, as the Europe 600 STOXX reported -2.6%, the French CAC 40 - 1.6%, the German DAX -3.75% and the UK’s FTSE100 - 2.46%. Asian markets also struggled with the Hang Seng operating considerably lower with its -7.49% November return, the Japanese Nikkei 225, Shanghai Composite and Korean KOSPI all finished negative, reporting -3.7%, 0.50% and -4.43% respectively.
Fixed Interest
With inflation and interest rates hot topics of the month, markets are paying close attention to central banks’ sentiments and policies. The Bloomberg AusBond Composite (0+Y) returned +2.08%, a sharp reversal from the previous month. In international fixed income markets, the Barclays Global Aggregate TR Hedged index’s returned 0.74% over the month. The Australian 10 Year yield ended the month at 1.73% and the US 10 Year yield at 1.44%.
Foreign Exchange
The US dollar had a strong month against most major currencies as the stronger inflation print created fear in the market that the US Fed would be the first to raise rates. Against the USD, the Australian dollar lost -5.2% over the month. Additionally, the Euro was down -1.9% against the USD, as well as the Australian dollar falling -4.2% against Euro.
Commodities
Iron ore experienced even bigger losses this month as it returned -14.4%. Notwithstanding the consecutive losses of this commodity of late, many economists believe this is not a depreciation of the metal but instead a mean reversion given the strong growth over the past 18-24 months.
After a strong October, Oil experienced a significant drop towards the end of the month, owing to Omicron concerns and the release of strategic stockpiles. Brent Crude returned -16.4% and WTI Crude lost -20.8%. Gold remained relatively flat in the face of the US Fed announcing tapering to pandemic stimulus measures as it finished the month losing 0.5%.