July 24, 2014

Monthly Financial Markets Update – July 2014

The US equity market posted fresh highs in June, but price support remains good globally and locally, says James Wright, Chief Investment Officer, JBWere. Read more for currency and property news from the NAB FX Strategy team and Nick Ryder, NAB Private Wealth Investment Strategist.

The US equity market posted fresh highs in June, but improvements in the US economy are set to flow through to corporate earnings which should continue to support strong equity prices.

The global equities market, as represented by the MSCI World Index, rose 1.4% in local currency terms in June, to be up 22.4% over the financial year just ended.

The US S&P 500 Index returned 2.1% in June, just short of the record high set earlier in the same month. While March quarter Gross Domestic Product (GDP) was revised down further in June, other economic releases were supportive of equities. Manufacturing and services surveys of activities were both up on the previous month while employment continued to track well, with 217,000 jobs added in May.

European equity markets were down in June, but continental Europe was strong over the financial year, with Germany up 23.5% and France up 17.4%. In the UK, the equities market grew by a modest 8.5% over the financial year.

Local markets

Closer to home, the Australian equities market was softer in June, falling 1.5%. While the market surged by a healthy 17.4% over the financial year, most of the gains were made earlier in the year, with the S&P/ASX 200 only up 3% over the past six months.

March quarter GDP was quite strong, rising 3.5% year on year, with the largest contribution from export income and inventories. The contribution from domestic demand continues to be relatively modest.

The Australian dollar continues to be supported by the low volatility in financial markets – making it an attractive currency for offshore investors seeking a higher yield.

Residential property prices bounced back in June after the seasonal decline in May, and other indicators continue to point to modest price growth ahead.

For further analysis, download the full report.