sharp decline of various commodity prices drove market
behaviour over the December quarter and significantly
impacted Australian mining and resources companies.
The other key change was halving the crude oil
price since June 2014 due to surging US oil supply,
weaker demand globally and Saudi Arabia’s refusal to
cut production. This impacted a number of oil
producing countries, in particular Russia with interest
rates increasing by 6.5% to 17% in December. Conversely,
the US economy showed strong economic growth, improved
consumer confidence and solid labour force growth.
quarter was also affected by continued slow global growth. Following Prime Minister Abe’s reelection, the
Bank of Japan announced it would extend its quantitative
easing program following more disappointing figures. Deflation
put greater pressure on the European Central Bank to
identify further stimulatory measures. Geopolitical
concerns in Syria, Iraq and the Ukraine, along with
the spread of the Ebola virus, also continued throughout
MSCI World ex-Australia Index (hedged into AUD) rose
4.1% over the quarter. The Australian Dollar depreciated
against most major currencies and this resulted in a
stronger return of 8.3% (in AUD) on an unhedged basis.
The strongest performing developed market, in
local currency terms, was Japan with the Nikkei up 6.7%.
S&P/ASX300 Accumulation Index underperformed hedged
overseas equities; 2014 saw the Australian equities
(5.3%) lag significantly behind hedged overseas equities
(13.2%). Small cap stocks significantly underperformed
large cap stocks for the quarter with the S&P/ASX50
Accumulation Index returning 3.1% and the ASX Small
Ords Accumulation Index retracting by 3.9%.