Investment update for May 2015
Australian consumer confidence hits high
US equity markets moved higher and recent upbeat figures from the US sparked a recovery in the $USD. Federal Reserve chair Janet Yellen expects economic data to strengthen and US interest rates to rise this year. Downward pressure from the global bond sell off.at the beginning of the month and the potential for a Greek exit from the Eurozone meant European equities were volatile but finished May fairly level. In Asia, continued Bank of Japan (BOJ) easing appeared to strengthen the Japanese economy. In significant growth headwinds, Chinese markets returned 3.8%, while equity markets in Hong Kong and Singapore lost ground.
Across developed markets, in local currency terms, the strongest performing markets were Japan (5.3%) and Italy (3.6%), while Singapore (-3.7%) and Portugal (-1.7%) were the weakest. The MSCI World ex-Australia Index (hedged into AUD) rose by 1.5% over the month. The Australian Dollar fell against most developed currencies over May, resulting in an unhedged return of 3.6% (in AUD).
Australian consumer confidence hit its highest point since November 2014 as a result of the easing policy of the Reserve Bank of Australia and a release of an expansionary small business package in the Federal Budget. Banks sold off heavily as investors digested news of slowing earnings growth and tighter capital requirements.
Small Caps stocks returned 2.4% and outperformed Large Caps stocks (0.0%). Financials stocks fell 4.1% while Industrials (5.4%) and IT (4.0%) were the strongest performing sectors. The ASX300 ended the month 0.4% higher.
Nearly all currencies fell against the U.S. dollar in May. Greece-exit fears hurt the euro in late May (down 2.0%), while the yen (down 3.6%) neared decade-low levels against the U.S. dollar. The International Monetary Fund joined a chorus urging the Bank of Japan (BoJ) to increase monetary stimulus efforts—days later, a soft 0.3% inflation print likely cemented a dovish shift at the BoJ. The British pound (down 0.3%) outperformed other European currencies, helped by the Conservative party’s electoral win.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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