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Monthly market update.

September 2016

In what was a volatile month, domestic and international markets eventually ended the month relatively flat. International central bank policy remained the key driver of market movements across global markets.

The Australian equity market performance primarily reflected global market activity over the month. The market generally trended lower but more than regained losses by month end. The largest movement in September was on 12 September when the markets reacted negatively to hawkish commentary from a member of the US Federal Reserve. The market traded higher from 13 September for the remainder of the month. The Reserve Bank of Australia (RBA) unsurprisingly left interest rates on hold at 1.5% in early September.

US equities were flat over the month with market volatility picking up from a very benign month of trading in August. Economic releases were mixed with nonfarm payrolls missing expectations and retail sales declining for the first time in five months, while the release of August CPI beat market expectations. The S&P500 Index experienced some weakness before the September Federal Reserve meeting, where interest rates were left on hold. Markets reacted negatively to hawkish comments from Boston Federal Reserve member Eric Rosengren, however, the sell-off was short lived as Federal Reserve Governor Lael Brainard called for prudence in raising interest rates.

Performance of Asian markets was relatively positive, with most Asian indices ending the month in positive territory. However, the Nikkei Index fell 2.6% as the markets reacted to the Bank of Japan’s (BoJ) meeting in September. The BoJ announced it would start targeting 10-year interest rates, committing to keep them around zero as part of a new policy framework aimed at boosting inflation up to its 2% target. Data released on the last day of the month showed that Japanese consumer prices fell for the six straight month in August.

The S&P/ASX300 Accumulation Index rose 0.5% in September. Small Cap stocks rose 1.5% for the month, while Large Caps stocks (0.6%) underperformed the broader market. Materials (5.7%) and Consumer Staples (1.6%) stocks outperformed, while Listed Property Trusts (-4.3%) and Telecoms (-4.0%) were the worst performing sectors.

The MSCI World ex-Australia Index (hedged into AUD) gained 0.3% over the month. The Australian Dollar appreciated in September, which resulted in a return for unhedged overseas equities of -1.3% (in AUD). In developed markets, Austria (4.4%) and Hong Kong (3.6%) outperformed the broader market, while Denmark (-4.9%) and Italy (-3.4%) underperformed. The MSCI Emerging Markets Index (-0.5%) outperformed unhedged developed markets.

The yield on 10-year Australian Government bonds rose from 1.8% to 1.9% over the month. Elsewhere in the world, the US, New Zealand and UK 10-year Government bond yields rose, while the Euro and Japanese 10-year Government bond yields fell. Long duration bonds and inflation-linked bonds underperformed the wider market.

Market Performance – September 2016

(income and capital gain or loss) 


3 months

Australian Shares (S&P/ASX 300 Accumulation)

0.5% 5.2%

International Shares (MSCI AC World ex-Aust) unhedged

0.3% 5.2%

International Shares (MSCI AC World ex-Aust) hedged

-1.3% 2.1%

Unlisted Property (Mercer Unlisted Property Funds Index (Pre Tax)

1.7% 2.5%

Listed Property Trusts (S&P/ASX 300 Property Trusts Accumulation)

-4.3% -1.9%

Australian Bonds (UBS Composite Index)

-0.2% 0.9%

Global Bonds (Barclays Global Aggregate (Hedged))

0.1% 0.8%

Cash (UBS Bank Bills)

0.1% 0.5%

Appreciation of $A against $US

1.8% 2.8%

Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays

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