Monthly Market Snapshot – April 2017

KEY INSIGHTS

In April, most major equity markets increased against a backdrop of reduced political risk in Europe and synchronised global growth, with Australian, US, Europe, and Japan equites up, while UK equities were down. Emerging market equities had a strong gain during the month.

Global bond yields, which move inversely to price, have decreased marginally over the month.

Domestically, the Australian dollar depreciated against all major foreign currencies, driven by a sell-off in commodities, especially with iron ore and oil prices falling sharply since March.

However, domestic equities rose during the month, driven by broad earnings growth and continued positive economic indicators, including Manufacturing and Services PMI (Purchasing Managers Index) survey results. Headline inflation rose to 2.1% year-on-year during the March quarter, within the RBA’s target range, up from 1.5% in the previous quarter.  Encouraged by the good news, the RBA has kept its current cash rate at 1.5%, expecting the job market conditions would improve gradually and wage growth would follow. The continued rise in property prices remains a concern and warrants the central bank’s careful monitoring of the housing market and assessing its recently introduced macro-prudential measures (e.g. limiting interest only loans) over coming months.

In the US, Trump’s bombing in Syria, his aggressive stance against North Korea’s nuclear programme, and the first round of the French election across the pond caused volatility in the market in early April. However, as the political tensions lessened and Emmanuel Macron won the first round, the volatility eased and bond yields bounced back. Strong corporate earnings results during the March quarter and continued positive economic survey data, including low unemployment rate and another positive Manufacturing and Services PMI survey result, are supportive of the US Federal Reserve continuing to tighten monetary policy over the course of the year.

The European political environment remains troublesome as the EU has come up with a large settlement on Brexit negotiation with the UK, although the election result in France was positive. However, the economic data suggest the eurozone recovery remains on track, with strong GDP growth figures over the first quarter of 2017, particularly robust in Germany, raising chances of the European central bank’s phasing out its quantitative easing.

In China, authorities have raised interbank interest rates, and fiscal stimulus in fixed asset infrastructure investment appears to be fading. During the month, growth rates in both imports and exports slowed markedly compared to the previous month, and Manufacturing and Services PMI decreased, although both remain pointing to the expansionary direction.

 

AUSTRALIAN EQUITIES

Australian equities rose in April, closing the month up by 1.0%, while the Resources sector fell by 1.6%.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

 

INTERNATIONAL EQUITIES ($A)

The hedged MSCI World Index rose 1.3% in April, while the unhedged index rose by 3.6%, as the Australian dollar depreciated over the month.  Emerging market equities posted strong returns, closing the month up by 4.2% in Australian dollars.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

 

INTERNATIONAL EQUITIES (LOCAL CURRENCIES)

Major overseas equity markets’ performance was mixed in April, with US, Europe, and Japanese equities marginally up, while UK and Chinese equities were down by 1.6% and 2.1%, respectively.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

 

FIXED INCOME

Australian bonds increased in April producing a 0.8% return. Global bonds also had a positive month with the composite index rising 0.7% during the month.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

 

AUSTRALIAN DOLLAR AGAINST MAJOR CURRENCIES

The Australian dollar (AUD) depreciated against all major foreign currencies in April, particularly against sterling where it decreased by 5.5%.

For the financial year to date, the AUD has recorded gains against all major currencies, although it is a relatively flat against the USD.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

 

PROPERTY

Australian and global listed property had a gain in April increasing by 2.6% and 1.1%, respectively.

Source: Frontier Advisors; Monthly Market Snapshot (April 2017)

Download this month’s snapshot

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For further information, visit our Financial Advice page or to make an appointment, please call 1300 133 177.

IMPORTANT INFORMATION

The information in this article is general information only and does not take into account your objectives, financial situation or needs. Before making a financial decision, please assess the appropriateness of the information to your individual circumstances and consider seeking independent advice from a licensed or appropriately authorised financial advisor. Past performance is not a reliable indicator of future performance.

The information contained in this document has been sourced from Frontier Advisors Pty Ltd, AFSL 241266; “Monthly Market Snapshot” (April 2017). The information contained in “Monthly Market Snapshot” is intended as general commentary and should not be regarded as financial, legal or other advice. Should you require specific advice on the topics or areas discussed please contact NGS Super directly or an appropriate advisor.

Information provided in this blog may have changed since the time of writing. You should confirm the information is current before relying on it.

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