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3 Minute Economic Summary – May 2016

Article By Adam Hurwood | | General News
• Growth assets continued their upward trend through May, with equities rallying across most major markets.
• The rally in the Australian market was largely due to the RBA’s decision to cut the official cash rate by a further 0.25% to 1.75%. This move was on the back of weaker than expected inflationary figures that were released in April. While the Australian economy is steadily growing, the below trend inflation figures are a result of primarily subpar wage growth.

• The cash rate cut flowed into the Australian bond market, with long term bond yields falling dramatically. The resulting downward movement meant a boost in investment returns for existing bond investments, which delivered a positive return through May.

• In the Australian Share market, stocks rallied on the back of the rate cut, largely due to the defensive and interest rate sensitive sectors of Healthcare, IT, Consumer Discretionary and telecommunications. Globally, shares were also higher in Australian terms, largely due to the depreciation of the Australian Dollar against most major currencies, but especially against the US Dollar.

• Listed property also rose during the month, albeit less than Australian shares. The low interest rate environment has remained a positive for the sector.

• Commodity markets retreated during the month, with iron ore the biggest loser, falling 24.3%, largely due to the Chinese Government clamping down on speculative futures trading on the Dalian Commodity Exchange. Oil however bucked the trend of the other commodities and was higher through May, due to unplanned outages in Nigeria, Canada and Libya bringing some balance back to the demand/supply curve.

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