Global growth continues to show considerable resilience despite the geopolitical tensions in the Ukraine and Middle East causing recent short-term price volatility.
There has been a rebound in Australian consumer confidence, with retail sales up, albeit from a low base, despite record unemployment numbers. Housing construction continues to gain momentum.
Although the International Monetary Fund has lowered its global growth forecast in 2014 to 3.4%, the 2015 growth forecast has been revised upwards to 4.0%.
The July Eurozone manufacturing data improved but continues to be impacted by the crisis in the Middle East and the Ukraine.
The RBA kept the cash rate at 2.5% in August, and it’s anticipated that interest rates will remain at this level well into 2015.
Key market numbers to the end of July are summarised in the table below:
The S&P/ASX 300 Accumulation Index had an outstanding month in July, increasing by 4.4%. This followed the disappointing month of June.
The S&P/ASX 300 Industrials Accumulation Index also had a stellar month, up 3.8%. The broader S&P/ASX All Ordinaries Index was up 4.5% in July.
For the 12 months to 31 July 2014, the S&P/ASX 300 Accumulation Index posted a solid gain of 16.27%; while the large market caps, represented by the S&P/ASX 50 Accumulation Index, had a similar performance, returning 17.35%.
Interestingly, all sectors were up in July. Utilities were the lowest performing sector (up 0.9%) in July. Materials, Information Technology and Telecommunications were the best performing sectors, increasing 7.7%, 5.7% and 5.1% respectively. Overall, the performance of the ASX sectors was extremely positive with all sectors sharply higher.
The MSCI World ex-Australia (unhedged) Index posted a negative return in July, down -0.25%. The MSCI World ex-Australia (hedged) was down -1.0%.
However, the global indices had an extremely divergent month with regards to performance.
The Hong Kong Hang Seng Index was the outstanding performer in July, up 6.8%.
The Japanese Nikkei Index was also an outstanding equity market, up 3.0% in July.
However, the German DAX was the worst performer across global markets covered in this analysis, down -4.3% for the month.
Over the 12 months to 31 July 2014, the Japanese Nikkei Index and the German DAX were the best of the major equity markets, up 14.3% and 13.7% respectively.
In July, the S&P/ASX 300 A-REIT Accumulation Index posted a strong gain of 4.9%, outperforming the broader Australian market.
On a 12 month rolling basis, property marginally outperformed the ASX 300 Accumulation Index.
Over a 1 and 3 year period, Australian REITs have outperformed global REITs but over a 5 and 7 year period, global property has outperformed. Global property, as represented by the FTSE EPRA/NAREIT Index was up 15.3% over the rolling one year period.
US 10-year bond yields were up 1.2% in July, closing the month at 2.56%. Australian 10-year bond yields were marginally down (-0.08%) and closed the month at 3.51%.
Australian bonds rebounded after a poor June. For July, the UBS Composite Bond All Maturities Index was up 1.37%.
Global bonds (unhedged), as measured by the Barclays Capital Global Aggregate Index, posted positive returns for the one year period ended 31 July 2014, up 1.46%. The hedged index posted a strong one year gain of 7.58%.
On a 12 month basis, Australian bonds returned 5.49%. They outperformed unhedged global bonds as measured by the UBS Composite 0 + years Index, but underperformed hedged global bonds that were up 7.58%.
In July, the Australian Dollar (AUD) was up relative to the Euro but down against other major currencies. The AUD declined -1.5% against the US Dollar (USD), to finish the month at 93 US cents. Over the past 12 months the AUD has increased 3.59% against the USD.
The AUD continued to gain against the Euro, up 0.79% in July. On a 12 month basis, the AUD was up 2.81% against the Euro.
Against the Japanese Yen, the AUD was marginally down (-0.01%) in July. On a 12 month basis, the AUD was up 8.31% against the Yen.
Against the British pound, the AUD was down -0.24%. On a 12 month basis, the AUD was down -6.98% relative to the British pound.
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