Investment update for April 2016
Markets recover as China remains a concern
Australian, US and European equity markets performed well again in April, compounding the strong performances in March, while Asian markets generally retraced over the month.
The US market finished the month in positive territory, with the S&P500 ending 0.3% higher. The Energy sector, in particular, benefited from the continued recovery in oil prices. The US Federal Reserve left interest rates on hold in April and signaled increased confidence in the US economic outlook, increasing the probability of an interest rate rise in June.
In Europe, investors reacted positively to a fall in euro unemployment and the rebound in the price of oil. The MSCI All Country Europe Index rose 3.5%, but European indices were choppy later in the month as the reporting season commenced.
Asian equities were volatile again in April, but trended downward. The Shanghai Composite Index reacted to numerous domestic and international economic data releases and bounced around, but finally finished down for the month, reflecting investor concern over China’s economic prospects. The Japanese stock market also closed lower for the month.
The Australian market provided a positive return in April, with the rise in commodity prices being a major positive factor. Iron ore prices have risen over 50% during 2016, and the oil price also peaked in April. Consequently, the S&P/ASX 300 Materials Accumulation Index rose 15.3% for the month. Following announcements that exceeded market expectations for business confidence and unemployment rates, positive sentiment also drove markets higher.
The S&P/ASX300 Accumulation Index rose 3.3% in April. Small Cap stocks returned 3.0% for the month, underperforming the broader market and Large Caps stocks (3.5%). Materials (15.3%), Energy (7.5%) and Health Care (3.3%) stocks outperformed, while Consumer Discretionary (-1.7%) was the worst performing sector.
The Australian Dollar depreciated in April, down 0.8% against the USD. This translates in international equities to a return of +2.4% (in AUD) on an unhedged basis.
The AUD was trading at US$0.7655 as at 30 April 2016.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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