Economic Review
Global Equity Markets
Global shares made strong gains in November boosted by promising signs for a trade agreement between the US and China. This trade optimism countered any political concerns such as the US Congressional impeachment inquiry into President Trump, BREXIT and the Hong Kong protests.
Wall Street made record highs with the more positive signs on global trade. While there has been no formal signed deal yet between the US and China since President Trump’s announcement of a phase one agreement in October, markets perceive that a deal is near. US economic data releases are broadly suggestive of solid economic growth. Steady US job gains as well as healthy consumer spending seem to be offsetting soft US business investment and industrial production.
European shares made solid gains in November also on the hope that the US-China trade agreement will eventuate. However, sedate European economic activity data as well as concerns over Britain’s delayed exit from the European Union have constrained European share gains. Britain’s general election on 12 December overshadowed UK shares with only modest gains recorded in November.
Asian share markets have also drawn solace from a potential trade agreement. However Chinese shares were impacted by recent subdued economic activity data for industrial production and retail sales.
Table 1: Global share market performance – November 2019
US S&P 500 +3.4%
US Dow Jones +3.7%
Euro Stoxx 50 +2.8%
German DAX +2.9%
UK FTSE 100 +1.4%
Japan Nikkei 225 +1.6%
China Shanghai Composite -1.9%
Source: Factset, IRESS, December 2019
Australian share market review
Australian shares reached record highs in November with robust gains for the Information Technology, Health Care and Consumer Staples sectors. Investors appear to have been particularly encouraged by the Reserve Bank’s sequence of interest rate cuts since mid-year and the recovery in the housing market in Sydney and Melbourne. There are also some early and encouraging signs that both business and consumer sentiment are stabilising.
However Australia’s economic data releases remain modest and suggestive of subdued growth. Retail spending is sluggish while car sales and housing construction are weak. Australia’s jobs performance faltered in October with the unemployment rate edging higher to 5.3%. Australian government bond yields continued their strong rally with the 10 year bond yield approaching 1% on the back of this subdued economic data.
The Australian Dollar (AUD) fell by 1.8% against the US Dollar to finish the month of November at USD0.6770. Softer Australian economic data was the key driver. Commodity prices were mixed with higher iron ore prices being countered by weaker gold and copper prices.
Table 2: Australian share market performance – November 2019
S&P/ASX 200 Accumulation Index +3.3%
S&P/ASX 200 Industrials Total Return Index +2.9%
S&P/ASX 200 Resources Total Return Index +4.9%
S&P/ASX Small Ordinaries Total Return Index +1.6%
S&P/ASX 200 A-REIT Total Return Index -2.3%
Source: Factset, IRESS, December 2019
Large Caps (S&P/ASX100)
Virgin Money UK (+29.3%), Caltex Australia (+26.7%) and A2 Milk (+22.7%) were the best performing large cap stocks during November.
The worst performing Australian large cap stocks during the month were Westpac Banking (-10.5%), Bank of Queensland (-10.4%) and National Australia Bank (-6.8%).
Listed property
The S&P/ASX 200 AREIT Total Return Index increased by 2.3% in November 2019, underperforming the S&P/ASX 200 Total Return Index by 1.0%.
All sectors posted gains led by the Industrial AREIT sector (+3.0%). Diversified AREITs returned (+2.5%), followed by Retail (+2.2%) and Office AREITs (+0.8%).
Written 4 December 2019.
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