Article By Adam Camac | | Financial Planning
- The Australian dollar gained more than 3 cents against the US dollar by the months end to reach $0.80. The US dollar also weakened against the Yen and Euro, as commodity prices were broadly higher again. The standouts were Oil and Iron ore, with Iron ore gaining 11% after a 14% rise in June, and oil gaining between 9% and 12%
- Australian inflation is now just below the Reserve Bank’s (RBA) 2-3% target range. Despite this, the result is unlikely to significantly influence the RBA’s monetary policy which is likely to remain unchanged in the short-medium term. The latest unemployment figures also indicated that the rate remained steady at 5.6% in June.
- Australian shares fell just slightly in July (–0.015%). Resources continued to increase very strongly (5.0%), whilst Industrials were down (-0.95%). Small cap stocks also underperformed their large cap funds.
- International shares were largely positive with only France and Germany posting negative returns. Tech was once again the best performing sector globally, whilst Materials were the strongest performers in Japan and Europe.
- A better than expected US reporting season supported shares, despite an end of month wobble as Amazon’s earnings disappointed, with the S&P500 and Nasdaq both hitting new all-time highs during the month.
- In the US, employment statistics continue to surprise on the upside with more people finding jobs than expected. Despite this, the unemployment actually rose to 4.4% from 4.3% in May as more people decided to look for work again. This combination of improving employment and rising participation rate is likely to be more important in the eyes of the US Federal Reserve (the Fed) than the marginal rise in the unemployment rate. However, inflation remains subdued and therefore reduces the pressure for the Fed to make multiple interest rate increases more quickly.
- European inflation is showing slow progress against the European Central Bank’s (ECB) 2% target. The still low inflation readings continue to influence ECB monetary policy decisions with the Bank leaving official rates unchanged in its July meeting and confirmed it would continue its stimulus program at least until the end of 2017. While inflation readings remain stubbornly low, business and consumer confidence have continued to remain positive and are significantly higher than at the start of the year.
- Chinese growth (GDP) has remained strong and at the same level as the March quarter, with retail growth noted to be very high.
- Australian listed property was flat over the month whilst global property improved (in Australian dollar terms) despite the appreciation of the Australian dollar.
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