Monthly Commentary – APRIL 2019

Developments in the global economy

US growth appears to have eased from 2018 levels but remains positive. However, Europe continues to produce lacklustre data and China continues on its path to redirecting its economy to be more domestically driven.


Australian employment data remains stable, with a 5.0% seasonally adjusted unemployment rate for March. The unemployment rate is being watched closely over the coming months as employment growth has clearly slowed since mid-2018 and rising unemployment could increase the probability of recession. There was further encouraging news in the building sector with a 19.1% rise in seasonally adjusted total dwelling units approved in February following on from a lift in January. However, approvals remain 12.5% lower than year ago levels. Retailing increased an encouraging 0.8% in seasonally adjusted terms for February 2019, however overall consumer sentiment is off. Western Australia was the worst performer, however it did record its first positive growth following eight consecutive months of negative growth. While there are encouraging signs of growth in the February March numbers, it remains to be seen if these in fact prove to be a levelling off or turn around in the economy as Australia’s economic growth eased over the last six to twelve months.


US unemployment was stable over April, however the participation rate fell through the month to 63.0% from 63.2%. Average weekly hours for all US workers was also relatively stable over March increasing 0.1 to 34.5 hours having declined 0.1 hour in February. Inflation remains low in the US with year on year inflation coming in at 1.3% for March. Added to this personal spending in the US rose 0.9% from a month earlier, the biggest increase in personal spending since August 2009. While some market commentators have expressed concerns with the US growth outlook the evidence is yet to firmly point to any downturn and, if US consumer confidence grows, 2019 may provide a reasonable outcome with respect to US GDP growth.


The HIS Market Eurozone Composite PMI fell in April to 51.3 from 51.6 the previous month, doing little to improve on weak results that have recently flowed from the Eurozone. Countering this an encouraging 2.8% year on year growth was reported for Eurozone retail sales which easily beat market expectations of 2.3%. However, consumer confidence was down on the previous month and the European Central Bank expects key interest rates to remain unchanged through 2019 with low levels of confidence apparent for the outlook.


The Caixin China General Composite PMI rose solidly to 52.9 in March from 50.7 in February. Service sector activity grew the most while factory output growth was the strongest since July 2018. This result is supportive of the Chinese government’s efforts to transition its economy to one driven more by domestic consumption versus export manufacturing. In another positive sign, retail sales were also strong, up 8.7% year on year, versus consensus of 8.4%.


Japanese data remained weak with Japan’s Consumer Confidence Index coming in below expectations at 40.5 for March, its lowest reading since February 2016. The unemployment rate ticked up to 2.5%, from 2.3% the previous month, and while imports grew 1.1% over the month they were not enough to offset the prior month’s -6.6% fall, reflecting poorly on Japan’s considerable export focused industries.


Developments in financial markets

Ten year bond yields eased higher, following significant falls in March due to concerns with a slowdown in growth. However, developed equity markets moved higher over April as concerns eased with respect to trade tensions and the US Federal continued to issue dovish statements.

Australian shares

The S&P/ASX 200 Accumulation Index rose 2.4% over April following a 0.7% increase in March. Over the past 12 months, Australian equities have returned 10.4%. Industrials outperformed returning 3.7% in the month while Resources lost 2.5%, giving back its gains from the previous month. Small caps outperformed with a 4.1% return and more than making up for last month’s underperformance of large caps. The best performing sectors were Consumer Staples (+7.4%), Info Tech (+7.3%) and Consumer Discretionary (+4.9%). The worst performing sectors were Property (-2.6%), Materials (-2.1%) and Utilities (-0.5%). At the stock level, the best performing stocks in the S&P/ASX200 in April were Eclipx Group Ltd (+58.6%), Dulux Group Ltd (+31.8%) and NRW Holdings Ltd (+23.5%). The worst performing stocks included Pilbara Mines Ltd (-22.8%), Galaxy Resources (-22.3%) and Evolution Mining Ltd (-12.8%).

International shares

The MSCI World ex Australia Index (A$) returned 4.6% in April. With currency returns included international shares have continued to outperform Australian shares over the past 12 months with a return of 14.3%. Emerging markets underperformed developed markets in April, delivering 2.6%, and continue to post a negative return (-0.6%) over the past 12 months.

The S&P 500 was again strong with a 4.0% return leading to 9.5% return over the last quarter. Markets have been reassured by dovish Fed commentary, easing concerns around US/China trade and a recognition that the US economy is continuing to grow, albeit at lower levels than in 2018. The Nikkei delivered a solid 5.0% return over the month on the back of strong foreign inflows into Japanese equities. UK equities continued their positive run, with the FTSE 100 Index delivering 2.3% as Brexit issues were delayed. MSCI Europe recovered delivering 4.1% over April following a negative return in March. The major markets of Germany (+7.1%) France (+4.4%) and Italy (+2.8%) posted strong positive returns. The Shanghai was flat, rising 0.2% having delivered solid returns over the prior two month period.

Fixed Interest and Cash

US bond yields eased higher over April with the US 10-year government bond ending the month at 2.50%, following a significant fall in yields during March. Australian 10 year yields were flat over April, however 3 year yields fell over the month to end at 1.28%, as markets anticipate the RBA lowering rates in 2019. As a result, returns to fixed interest were boosted with the Bloomberg AusBond Composite Bond Index posting a 2.0% return in the month, while global fixed interest as measured by the Bloomberg Barclays Global Aggregate Bond Index hedged in $A was flat for April.


AREITs and Global REITs both fell over April following a very strong March. As yields stabilised and rose moderately, REITs appear to have consolidated and gave up some of their healthy March gains.

Currency and commodities

The Australian dollar fell over April ending the month at US$0.7051 from US$0.7096 a month earlier. While the AUD began the month showing some strength on the back of positive China news, it finished weaker as poor employment data and disappointing CPI numbers dominated trade. While many of the major metals saw prices retreat over April, iron ore was strong, ending April on US$93.24. Oil was also strong over the month with West Texas Intermediate (WTI) rising 5.5% while gold fell 1.0%. Weakness in the other major metals saw tin down 8.0%, nickel fall 5.9% and lead off 4.0%. Other metals price changes were less extreme with copper (-0.9%) and zinc down -1.3%.

Key market returns at 30 April 2019

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