Market Summary | August 2019
MARKET OVERVIEW
Investment markets declined in August and trade tensions continue to have a big impact on investor confidence. We also saw world central banks offer support to economies in an attempt to address the ongoing economic uncertainty.
UNITED STATES
The major US markets both declined in August despite positive news flow coming through internally. The Federal Reserve cut the funds rate by 0.25% on the 31st of July, giving the local market some much needed confidence. Donald Trump also began to flirt with the idea of tax cuts, to provide the economic stimulus that he has been struggling to get from his friend, Fed Chairman Powell.
Early August also saw many of the American listed companies report earnings, with the market as a whole broadly exceeding analyst expectations, indicating analyst views were too pessimistic. Notable performers were consumer companies Lowes & Target, who both exceeded guidance. Match Group, the parent company of match making app Tinder, rose 20% following their earnings call.
Notable under-performers included newly listed ridesharing company UBER, who missed forecasts across the board whilst their biggest competitor Lyft managed to impress Wall Street. Tech powerhouse Netflix missed forecasts, shedding 18% from their valuation following a significant miss in the growth of their subscriber base.
The S&P 500 Index (USD) returned -0.52%
The Dow Jones (USD) returned -0.74%
ASIA
In Hong Kong, the pro-democracy protests continued throughout the month further disrupting the state, luckily a withdrawal of the extradition bill came through in early September.
President Trump caught markets by surprise kick-starting the trade war off again placing a 10% tariff on the remaining US$300 billion of Chinese exports to the
US from 1 September 2019. In a quick response China “manipulated” their currency dropping it to the weakest level in 11 years.
Despite this, economic data flows out of China has remained solid. For now, it appears the Chinese economy is achieving its 6.0–6.5% growth target but the simmering trade war continues to add downside risk. The same thing cannot be said about markets which suffered throughout the month of August.
The Hong Kong Hang Seng PR Index (HKD) fell -9.87%
The Nikkei 225 PR Index (JPY) returned -2.69%
The Shanghai Shenzhen CSI 300 PR Index (RMB) returned -0.68%
EUROPE
A relatively quiet month for European markets, generally following suit with the remainder of the world as growth in the euro-zone continues to slow.
It’s becoming increasingly apparent that Boris Johnson is no more equipped to tackle the Brexit debacle than his predecessor Theresa May. The current “deadline” stands at October 31; however, the separation strategy still remains cloudy.
The UK’s FTSE 100 PR Index (GBP) returned -2.94%
The German Dax (EUR) fell -3.71%
AUSTRALIA
The Australian GDP growth results for the June quarter were published in August further highlighting the slowdown in economic growth. GDP growth for the June quarter was 1.4% year-on-year, the lowest result since the GFC. Whilst we still have to wait a little longer to assess the affects of the recent rate cuts, Australia has recorded its first current account surplus in 44 years which hopefully may encourage some fiscal stimulus.
Australian markets fell -2.36% in August as sentiment globally took a toll on local markets, whilst local earnings results were in line with expectations.
Earnings season produced some winners and losers during August. The best performer from the ASX 200 was Biotech Nanasonics who returned 21.05% for the month following great full year results. Lendlease Group returned 17.25% for the month after announcing plans to exit their engineering business. SmartGroup Corp, Afterpay Touch Group & WiseTech Global rounded out the months top 5 performers.
On the other side of the coin, the indexes worst performing stocks was SpeedCast International which fell 58.89% as the company significantly missed earnings guidance. Baby formula manufacturer Bellamy’s dropped -25.74% in August however their investors were saved in early September as Chinese company Mengniu Dairy Company placed a robust takeover offer.
MARKET RETURNS (LAST 12 MONTHS)
Recent performance has pushed the return of Australian equities ahead of International equities. Performance from equities remains in positive territory whilst returns from Cash remain somewhat suppressed.
The above graph summarises the performance of the major financial markets and gives you an indication of how these markets performed over the last 12 months. The graph does not reflect your actual portfolio performance.