The Australian share market enjoyed another positive month, with the S&P ASX200 Index increasing by 1.6% in November, following the 4.0% return in October. The Resources sector again performed strongly but was very volatile throughout the month. Property, IT and Energy were also key drivers behind the markets positive performance.

Whilst these sectors have helped the share market, the Australian economy continues to deliver mixed results. Employment continues to grow, as does business sentiment, however consumer spending, particularly retail sales remains flat, and wage growth remains subdued. As a result, the Australian cash interest rate is expected to remain unchanged for the foreseeable future.

The global share index (MSCI) continued its winning streak now 13 months in a row of positive performance.

In the US, the major S&P500 share index reached a new intra-monthly high. This was primarily due to the announced Trump Tax Cuts for companies and positive earnings announcements for large US corporates.

The continued improvement in the US employment rate is now starting to result in wage growth, as employers need to increase salaries in order to compete for talent/staff. This is an overall positive move for the US economy as it is anticipated to help lift consumer spending and economic activity as employees start to feel wealthier.

Inflation, interest rates and employment remain key focuses for most major economies:

• The European unemployment rate continues to trend lower, falling to 8.9% in September; this has fallen from close to 10% a year ago to the current level
• In the UK, the Bank of England increased official interest rates by 25bps to 0.5% on 2 November. In contrast to Europe, UK inflation has been above 2% through much of 2017, partly in response to the weaker currency following the Brexit vote
• Inflation is also starting to increase notably in China and will continue to be monitored closely, particularly as manufacturing, which historically was shifted to China because it was cheaper, may no longer be the case in the medium-long term

Over the past 12 months, developed market global equities have returned 21.3% (before taking into effect the impact of currency), whilst Emerging markets outperformed developed markets, returning 27.9%.

With investors expecting interest rates in Australia to remain flat, listed property increased as borrowing costs are anticipated to remain low and demand for office and manufacturing space remains strong. The anticipation of rates to remain on hold also saw Investors continue to buy Australian 10-year government bonds driving up the price.

The Australian dollar continued its recent downtrend, falling to US$0.7565 compared to US$0.7656 at the end of October. Commodity prices were mixed with copper, nickel and zinc ending the month lower, while gold, lead and tin prices moved higher. Iron ore prices jumped more than 8% to US$67.5 per tonne but this had little impact on the Australian dollar.

Compiled with BT Applied Research Monthly Commentary –October 2017

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