Investment update for October 2019
US and overseas markets
Trade talks between the US and China turned positive in October with a mini-deal formed, but not sealed. The deal would see China purchase more US agricultural products – in return, the US wouldn’t impose further tariffs.
Third quarter US economic data was less favourable, showing a slowing economy and an annualised growth rate of 1.9%. In response to the slowing momentum, the US Federal Reserve cut interest rates for the third time this year, to a range of 1.5% to 1.75%.
In the United Kingdom, a no-deal Brexit was avoided after the deadline was extended to January 2020. Subsequently, a UK general election was announced for 12 December.
Geopolitical tensions remained with the Turkish invasion of northern Syria, following President Trump’s announcement of the withdrawal of US troops from Syria. Additionally, anti-government/pro-democracy protests continued in Hong Kong, whilst civil unrest flared in Chile, Spain, Ecuador, Lebanon and Iraq.
In Australia, the Reserve Bank of Australia (RBA) cut the official cash rate to 0.75%. Business sentiment remains below average and consumer sentiment fell during October.
The Australian share market declined 0.4% in October, with the IT (-3.2%) and Financials (-2.9%) sectors being the biggest detractors, while the Health Care (7.3%) and Industrials (2.9%) sectors posted the largest gains. Large caps (-0.4%) slightly outperformed small caps (-0.5%) over the month. Australian Property Trusts (1.4%) underperformed Global Property Trusts (1.8%) for the month.
The Australian Dollar finished higher against most major developed market currencies over the month, except against the Pound Sterling (-2.7%) which rallied as the risk of a no-deal Brexit diminished and the Euro (-0.2%).
The MSCI World ex-Australia Index (hedged into AUD) rose 1.9% over the month. In developed markets, Sweden (4.9%) and Japan (4.9%) outperformed the broader market, while Belgium (-7.1%) and the Finland (-2.4%) underperformed.
The bond market posted negative returns in October with yields rising in most developed markets, with the exception of the US. The US 10-year treasury yield ended the month at 1.69%, the Australian 10-year yield at 1.15% and the UK 10-year yield at 0.62%.