The global economy performed well over the month of April showing strong activity and benign inflation. Oil prices reached a new high of about US$74 a barrel. For the month of April the MSCI World Index ex Australia (unhedged) fell 3.3%. The MSCI World ex Australia Index (hedged into $A) rose0.9% and outperformed its unhedged counterpart as a result of a rising Australian dollar.
Australian economic indicators were reasonably strong in April. The unemployment rate improved, falling to below 5%. Consumer spending grew in April supported by employment growth and modest wage increases. Business activity increased according to the Australian Industry Group’s index. The strong performance of the Australian share market continued in April with the S&P/ASX 200 Accumulation Index returning 2.6% for the month. Due to strong performance from stocks such as Iress Market Technology and Computershare, Information Technology (up 6.1%) was the strongest performing sector. Also performing strongly was Telecommunications (up 4.6%). Property (down 0.3%) and Industrials (down 0.2%) were the worst performing sectors.
The global economy performed well over the month. Due to continuing strong demand, and supply issues regarding Iran and Nigeria, the oil price hit a new high of about $74 a barrel in April. Other data from the US was stable with most companies reporting results in line with or better than expectations for the March quarter profit reporting season.
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Economic growth continued in Europe and business conditions were at a five year high in March, according to business activity surveys. Business conditions were also strong in Japan according to the Tankan business conditions survey. In China, the central bank increased one year interest rates from 5.58% to 5.85%.
Australian bond yields increased in April for the second consecutive month. The UBSA All Maturities Bond Index returned -0.6% for the month. The Australian market adjusted for an expected imminent 25 basis point increase in interest rates with bank bill yields also rising considerably. International bond yields also continued to increase in April with US bond yields rising due to a stronger than expected core inflation report. Yields in Europe and Japan rose due to signs of ongoing economic strength.
The Australian listed property sector weakened in April with the S&P/ASX 200 Property Accumulation Index returning -0.3%. Key influences on market performance were acquisitions and capital raisings. In unlisted property, the office sector has continued to recover fuelled by strong space demand in many markets, particularly in Perth, Brisbane and Sydney. However demand for industrial property has been subdued recently.
Please note that this economic commentary does not constitute advice. |
