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The month of September saw a significant fall in oil prices and interest rates in the US remain on hold at 5.25%. Global and domestic share markets performed well over the month. The MSCI World ex Australia Index (unhedged) rose 3.6% during the month while the MSCI World ex Australia Index (hedged into the $A) rose 2.0%. Australian equities, as measured by the S&P/ASX 300 rose 1.3%. In Australia, interest rates were left on hold in September and are currently at 6.00%. Housing approvals and finance data were strong. Gross Domestic Product for the June quarter was released in September and showed a slowdown in growth, mostly due to a reduction in inventories and weak net exports. The latest Financial Stability Review from the RBA was mostly positive. However a concern coming from the survey is that household interest payments are at historic highs. The S&P/ASX 300 was up 1.3% over the month. The best performing sector was Healthcare (up 9.3%), buoyed by potential takeover activity. The worst performing sector was Materials (down 3.2%), due to commodity price volatility. In the global economy, oil prices fell sharply as geopolitical tensions lessened and supply concerns fell over the month. Data from the US was positive with growth moderating and inflation falling to controllable levels. Inflation also fell in Europe following the drop in energy prices. However comments from the European Central Bank suggest there will be another increase in interest rates this year. The Japanese economy is in a strong position, with gains in business confidence over the month, growth in retail sales and strong industrial production. In China, retail growth is strong. However there has been a slowdown in investment and inflation remains within control ranges, indicating efforts from Chinese authorities to slow the Chinese economy will not become too aggressive. There was little movement in the Australian bond market during the first weeks of the month. However yields fell lower towards the end of the month amid signs of a global economic slowdown. Domestic fixed interest, as measured by the UBSA Composite Bond Index, returned 0.8% for the month. Internationally, bond yields were also generally down in September. International fixed interest, as measured by the Lehman Global Aggregated Hedged Index, returned 0.8% for the month. The Australian listed property sector performed strongly over September, with the S&P/ASX 200 Property Accumulation Index returning 3.8%. Returns in the unlisted property sector were also strong and are at their highest level since the “property boom” of the late 1980s. The resources boom has flowed onto demand for office space, which has increased significantly. The Mercer Unlisted Property Index returned 3.1% over the month. Please note that this economic commentary does not constitute advice. Source: Watson Wyatt Investment Consulting Disclaimer |
