Monthly Financial Markets Update – September 2014
With better US economic data, global markets were stronger in August. Locally, as James Wright, JBWere Chief Investment Officer explains, company reporting season was positive and stocks rewarded for delivering solid earnings, yields or capital management.
Global equities (as represented by the MSCI World Index) shrugged off geo-political concerns to post a strong month. The index rose 2.7% in local currency terms in August and is up 20.9% for the past year.
The United States S&P 500 rose strongly to close the month on record highs. The index closed up 3.8% for the month to 2003, above the psychological 2000 barrier. US economic data was relatively positive across the month, with a good durable goods report and a rise in consumer confidence which now sits at a post-recession high.
European equities markets were stronger in August (Germany 0.7%, France 3.2%, Spain 0.2% and the UK 2.1%) helped by central bank comments. France reported that its economy had stagnated for a second straight quarter, whilst the German economy contracted 0.2% in the second quarter. While the ECB sat on their hands in August, they’ve subsequently cut all interest rates by 10 basis points and announced a quantitative easing program targeting non-financial private sector assets starting from October.
The Australian equities market (as represented by the S&P/ASX 200 Accumulation Index) rose 0.6% in August. Domestic data flow was mixed, and included: strong house price gains; solid headline credit; a slight improvement in retail sales and private capital expenditure, offset by weaker building approvals; a fall in consumer confidence; and a rising unemployment rate. The Reserve Bank of Australia left rates on hold and downplayed the prospect of cutting rates further, despite rising unemployment.
Company reporting season was generally positive, with very modest reductions in earnings per share forecasts more than offset by higher dividends. Standout sectors were Healthcare (+6.6%) and Telecommunication Services (+4.3%).
The Australian Dollar rose nearly half a cent in August to US$93.33 cents.
Australian capital city house prices continued their strong growth, with a 1.1% gain over August and a 4.2% gain for the last three months. In what remains a two tiered property market, growth was led by the eastern states, with Melbourne prices up 6.4% for the past three months and Sydney prices surging 5%. Over the year to August end, the highest gains were in Sydney (16.2%); Melbourne (11.7%) and Adelaide (5.9%).
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