Lonsec Market Commentary – July 2017
The Australian market experienced a flat month in July, down 0.01%, with gains from the Materials and Financials sectors propping up the index.
Overall the Australian economy appears well positioned with an improving employment situation, strong manufacturing growth, and a robust retail sector. However, the improved employment outlook contrasts with the lack of growth in wages, which remains at a record low, which is a universal phenomenon in developed markets.
The Australian Dollar (AUD) rose 3.8% against the United States Dollar (USD) in July, from 0.7689 to 0.7980, reaching its highest level since May 2015.
As its August meeting the Reserve Bank of Australia (RBA) left the cash rate on hold at 1.50%. The RBA noted that inflation continues to run below the 2% target, with higher prices for electricity and tobacco expected to boost CPI in coming months. However, working in the other direction is increased competition from new retail entrants – a reference no doubt to Amazon’s imminent arrival on Australian shores
Global equities – The S&P 500 TG Index gained 1.93% in USD terms and pushed to a new record high, but fell 1.94% in AUD terms as the USD weakened. The Dow Jones Industrial Average pushed above 22,000 points for the first time, with no small thanks to Apple, which jumped 3.27% in USD terms before hitting a new record high in early August.
Global shares, measured by the MSCI World Index, were down -1.59% in AUD terms, with the Japanese and German markets being the contributors. The DAX fell 3.90% as a crisis erupted in Germany’s automotive industry, with the big five (Audi, BMW, Daimler, Porsche and VW) pressured with multi-billion euro fines for cartel behaviour by the European and German competition authorities.
(Ref: Lonsec July 2017, Issue Date: 09-08-2017)