Australian Market Review And Outlook April 2015

Global Macro

Concerns surrounding an impending rate hike in the US put pressure on global equity markets at the outset of March. Yet these fears were eased by the Fed's March Meeting Statement, that suggested a slower hike trajectory than many had anticipated. This was supported by expectations of a moderation for US economic growth. Nonetheless, the US Dollar continued its relentless march higher against most of its major peers.

Meanwhile, the European Central Bank kicked off its highly anticipated asset purchase program. This had a noteworthy impact on European sovereign bond yields, which slid to fresh record lows.

Policy makers in China also implemented additional easing measures with Premier Li citing a need for supportive policy after revising down the country's GDP growth target to 7 per cent - the lowest in a quarter of a century. Fears of a further deceleration for the Asian tiger contributed to a continued decline for global commodity prices.

Australian Macro

At home, the Reserve Bank left the Cash Rate on hold at a record low of 2.25 per cent, yet flagged the potential for further policy easing down the track. The central bank further noted the exchange rate remains high by historical standards, particularly on a trade-weighted basis. Local economic data revealed a welcome decline in the unemployment rate to 6.3 per cent, and a slightly weaker-than-anticipated growth in Q4 GDP of 0.5 per cent.

Australian Equity Market

The Australian Equity market lost traction during March, following significant gains earlier in the year. After hitting a multiyear high, just shy of the psychologically-significant 6,000 barrier, the ASX 200 finished at a marginal loss. Making headlines over the period were the takeover bids for iiNet and PanAust, which followed on the heels of the Toll holdings takeover announcement in February.

Sector-wise, investors resumed their rotation into the health care space, which was among the top performing areas over the month. Meanwhile, energy and resources gave back February's gains alongside a significant slide in global commodity prices.

Australian Property Market

Australian house prices were higher overall during the Month of March, according to data compiled by CoreLogic RP Data. Sydney continued to demonstrate the most significant gains with an astounding 3 per cent rise over the month alone. Meanwhile, among the other capital cities, Brisbane saw a slight decline of 0.3 per cent, and Perth was flat over the period.

Outlook

The thematic of cheap money on a global scale is likely to continue to influence investor decisions over the near term. This in turn holds the potential to spark a resumption of the run higher for global equities. Yet sector performance is likely to continue display dispersion, as yield names outperform on dividend demand, while resources suffer on the back of depressed commodity prices.

Divergence among central bank policies also stands to benefit the US Dollar as the Fed remains on the path (albeit a seemingly long one) to policy normalisation. This stands in contrast to the RBA's willingness to cut rates to fresh record lows. Taken together this could further pressure on the AUD/USD exchange rate.