Global shares rose 5.4% and 1.7% in hedged and unhedged terms, respectively. The market was led higher by US stocks with the Nasdaq (a tech-heavy index) up 7.3% while the benchmark S&P 500 index was up 6.9% (both in USD terms) as investors were positive on the September quarter earnings results with tech giant Microsoft up 17.9% as one example.
Australian shares underperformed global shares, falling 0.1% in October. The leading sectors were Technology (up 2.1%) and Health Care (up 1%). Industrials (down 3.3%) and consumer staples (down 2.3%) were the worst performers. Technology returns were supported by Computershare which benefitted from rising bond yields given its higher interest income on client cash balances.
Fixed income returns were poor particularly for the Australian market. An increase in bond yields predominantly of short to intermediate duration saw both Australian and international bond markets sell off. The pain was more severe domestically as it became clear the RBA had abandoned its yield curve control for the 3-year bond which ended the month at 1.22% (compared to the RBA 0.1% target).
The Australian dollar (AUD) rose 3.8% against major currencies and 4% against the US dollar. A key boost came from the reopening of the economy after lockdowns while the rise in bond yields also made our currency more attractive to speculators
As global growth stabilises?
Global business surveys suggest economic growth momentum may have stabilised in October with improvement in services sector offsetting weakness amongst manufacturers. Supply chain disruptions remain an ongoing feature in business surveys impacting inflation.
Chinese developer Evergrande repaid an outstanding coupon on one of its foreign bonds. Investors appeared more confident on containment within China of any further issues.
Economic momentum is bouncing back domestically as NSW and Victoria eased lockdown restrictions.
The RBA withdrew guidance that interest rates would stay at 0.1% until 2024, suggesting a more optimistic view on the economy. The RBA also ended its policy of targeting 0.1% for the 3-year government bond yield.
Sep-21 quarter inflation showed an annual rise of 3% while underlying inflation rose 2.1% over the same period.
Major asset class performance
5 years (p.a.) %
Australian small companies
Global shares (hedged)
Global shares (unhedged)
Global small companies (unhedged)
Global emerging markets (unhedged)
Global listed property (hedged)
Australian fixed income
International fixed income
At close on 31/10
Trade weighted index
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