- April was a more optimistic month for investors as major markets rallied and started to recover from a poor March quarter caused by the global Coronavirus pandemic.
- Despite markets being positive across the globe, there was still volatility as uncertainty on the impact of the coronavirus and when economies may reopen.
- All Australian domestic sectors produced positive performances over April with the Energy sector leading the way after a dismal March as oil prices crashed. A recovery in oil prices and an increase in demand for cheap energy stocks has helped the sector essentially recover much of March’s losses. Meanwhile consumer staple stocks lagged the rest of the market.
- Unemployment in Australia increased over the month of April to 6.2% (up from 5.2%), but the data was better than expected. With unemployment high (and likely to increase further) this will lead to a decline in consumer consumption impacting inflation, a reduction in income tax collected by the government, while increasing the social security burden on the government.
- Most International travel restrictions are expected to remain in place for some time which will continue to impact Australia’s tourism and education sectors. However, a travel bubble between New Zealand and Australia (and potentially some pacific island nations) could open in the next 6 months which will help many businesses.
- Australia has also seen trade tension escalate with China over the past few weeks as the Chinese government banned beef exports from four large meatworks and placed an 80% tariff on barely exports. Many jobs and businesses will be impacted, highlighting Australia’s large reliance on China as our number one importer. There is also concern that more Australian exports could be targeted.
- The timing of these sanctions is questionable as the Australian Government has helped the push for in independent inquiry (along with over 100 other countries) into the cause of the Coronavirus pandemic.
- China also passed a new national security law diminishing Hong Kong’s separate legal status. This has led to further tension between the US and China. Hong Kong currently enjoys special economic status and privileges under US law, leading to concerns on retaliation by the US as the district loses its autonomous status. There has also been a drop in Hong Kong’s Hang Seng index, which has recovered slightly since the news but is expected to be volatile in the short-term with Hong Kong the financial hub of Asia.
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