Market Summary | February 2019
MARKET OVERVIEW
Central banks backtracking from their tightening programs along with positive developments in trade negotiations between the US and China pushed equity markets higher in February.
The positive start to the year has resulted in equity markets recouping much of 2018’s sell-off.
UNITED STATES
The US markets had a good month continuing January’s positive momentum largely supported by a shift in sentiment by the Federal Reserve. The largest gains came from Information Technology (+6.6%) and Industrial (+6.1%) sectors which continued to rise after a stronger than expected earnings season.
Despite a strong month on the markets, economic data indicates that there’s been a slowdown in the US economy. Downgrades in both growth and inflation suggest GDP growth will decrease for the December quarter with estimates clocking in at 2.6% vs 3.4% for September.
Retail sales fell significantly in December and across the typically strong Christmas period affecting a number of stores and profitability across the sector.
The S&P 500 Index (USD) rose 2.97% for the month of February.
ASIA
The big news for the region was that the US/China trade dispute is looking like it may be approaching the finish line. This is great news for the Chinese economy as growth has now slowed to its lowest point in around 30 years. From the equity market’s perspective, however, much bad news had already been priced in and markets performed strongly during February.
The challenge for China now is that it will need to wean itself off its reliance on credit-fuelled investment spending whilst also targeting a healthy rate of growth.
The Hong Kong Hang Seng PR Index (HKD) returned 2.47%
The Nikkei 225 PR Index (JPY) returned 2.94%
The Shanghai Shenzhen CSI 300 PR Index (RMB) returned 14.6%
EUROPE
Investor confidence in the Eurozone fell to a multi-year low, as German growth slowed to zero narrowly avoiding a technical recession smashing the country’s growth outlook. The industrial and manufacturing sector that has long been a driver of growth for the German economy has struggled to adapt to new emissions regulations, slowing production and productivity.
With March 29 rapidly approaching everyone’s eyes will be on the UK and Brexit to see how everything unfolds. The Bank of England has predicted a 25% chance of the economy falling into recession by mid-year. Labour leader Jeremy Corbyn has thrown his support behind a second referendum but it is looking like a Brexit extension is more likely.
The UK’s FTSE 100 PR Index (GBP) returned 1.52%
The German Dax (EUR) rose 3.07%
AUSTRALIA
The biggest development in the Australian economy in February was the shift in the RBA’s policy bias from tightening to a neutral stance following weakness in China, the downturn in global growth, and the impact of the downturn on housing. Markets, however, have gone one step further and are now fully pricing in a cut in the cash rate by November 2019 after a strong month’s performance.
The S&P/ASX 200 Index returned 5.98% through February, returning 10.1% over January and February.
MARKET RETURNS (LAST 12 MONTHS)
Recent performance has pushed equities back into positive territory whilst returns from International Equities ($AUD terms), Fixed Income & Cash remain positive.
January’s performance provided positive returns across equity markets. With the divergence between International & Australian Equities tightening.
Energy (+7.9%) and Information Technology (+7.6%) sectors once again performing strongly over the month. But it was the Financials sector (+9.1%) that was the real driver of returns, with the recovery in banks and insurance providers also offering a boost to asset managers. February’s earnings season was mixed but generally, beat expectations.
Meanwhile, Australia’s tech darlings have continued their inexorable rise, with Appen (+46.7%) thoroughly beating its earnings guidance and Afterpay Touch Group (+15.9%) likely to be largely unaffected by the Senate’s inquiry into the ‘buy now, pay later’ sector.
Recent performance has pushed equities back into positive territory whilst returns from International Equities (AUD dollar Terms), Fixed Income & Cash remain positive.
February’s performance provided positive returns across equity markets. With the divergence between International & Australian Equities tightening.
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.