Market and Economic overview
Australia
United States
Europe
New Zealand
Asia
Australian dollar
The Australian dollar clawed back all of its lost ground from March. The currency gained 7.0% against the US dollar, closing April at 65.5 US cents. Similar strength was seen against other currencies too.
Commodities
Most commodity prices finished the month of April stronger as demand uncertainty eased. Following sharp falls in March, copper (8.0%), nickel (8.0%) and zinc (3.4%) posted solid gains, although not enough to recover previous losses.
Iron ore (1.4%) reversed its downward trend on signs of a turnaround in Chinese manufacturing activity and reflecting China’s economic stimulus plans.
Oil prices (WTI Crude -26.6%) continued to fall, although stemmed losses towards month end on evidence of falling production.
The gold price (7.6%) again proved resilient against a backdrop of ongoing market uncertainty, while platinum (9.8%) and silver (10.1%) bounced back after March’s sharp falls.
Australian equities
The equity market recovery in the last week of March continued throughout April. The S&P/ASX 100 Accumulation Index rose 8.4%, registering its strongest monthly return since 1988.
Confidence was initially supported by the huge monetary and fiscal responses to the pandemic and later by encouragement that social distancing restrictions were proving effective.
The full impact of the virus remains unknown, however, and the shock to company earnings and balance sheets has placed additional pressure on dividend policies. At the same time, most companies have withdrawn earnings guidance.
Australia’s banks continued to underperform, as delays to mortgage payments and decreased property activity threaten earnings. The growing prospect of dividend cuts and the view that the banks will play a key role in supporting the economy has further dragged on investor sentiment.
Listed property
After plunging dramatically in March, global listed property markets rebounded in April. The COVID-19 situation continues to be the dominant driver of property securities.
Due to virus containment measures globally, including widespread lockdowns, there are rising expectations for sweeping rent abatements across the sector, particularly in the most heavily hit sub-sectors such as discretionary retail.
Many listed property securities globally have now withdrawn their earnings and dividend guidance due to the uncertainty.
Global equities
Unprecedented levels of monetary and fiscal support helped global markets stage a remarkable recovery. The MSCI World Index bounced 10.6% in local currency returns in April – its strongest month since 1975.
The appreciation of the Australian currency tempered global equity returns for domestic investors, with the MSCI World Index rising ‘only’ 3.7% in Australian dollar terms.
UK equities were the weakest performers in April, with oil giant Shell announcing a cut in its dividend. Financial stocks also weakened after Lloyds revealed a large drop in profits.
Disappointing returns from energy and financials stocks have contributed to the underperformance of the MSCI World Value Index in recent months.
Global and Australian Fixed Income
Bond markets were substantially calmer in April compared to March as central bank support programs appeared to be having their desired effect.
The Reserve Bank of Australia, for example, has bought around $50 billion of government and state government bonds in the past few weeks. This has materially improved liquidity and helped steady the local bond market.
Benchmark 10-year US Treasury yields closed April just 0.03 percentage points lower, at 0.64%. Yields also declined in the UK, Germany and Japan, by 13 bps, 12 bps and 5 bps, respectively.
Australian yields moved in the opposite direction, though not significantly. The yield on 10-year Commonwealth Government bonds closed the month 13 bps higher, at 0.89%.
This resulted in a modest negative return from the domestic bond market.
Global credit
Like shares, corporate bonds were buoyed by an improvement in risk appetite globally. Credit spreads – the difference in yield between corporate bonds and comparable high-quality government bonds – narrowed substantially.
Companies looked to take advantage of improving risk appetite and strong inflows into the asset class by offering a substantial amount of new bonds.
In some cases, this was to bolster their balance sheets to help cushion the impact of a more prolonged period of lower profitability.
Source Accounting
“Capstone made everything so easy by providing all the templates and support we need which makes me feel comfortable that I am in good hands with my licensee. I would highly recommend Capstone to any fellow Accountant."
Maven Accounting
“I would recommend Capstone to any accountant seeking to become licenced within the financial services industry. Their personal service and support to me and my firm has been exceptional."
Financial Planit
“I joined Capstone Financial Planning in 2003 as I was looking for a Group that could offer a high level of independence and freedom that came from not being institutionally owned."
Willow Wealth Management
“Compliance support and feedback is crucial to our business. The Capstone team are always there to assist us in improving and providing best advice and best practice standards. Their input is always positive and constructive."
Nicholson Financial Planning
“I would happily recommend Capstone as a licensee to other advisers. The Capstone staff are friendly, knowledgeable, and professional, and they are genuinely committed to meeting their advisers' needs. I feel very secure in the knowledge that I have Capstone backing my business.”
Acquire Strategic Advisers
“Capstone’s support has been exceptional and consistent from the time our business made the transition. Capstone is continually trying to enhance their service offerings to their advisers, at both the higher level, and more specific lower levels within our business. They are an exceptional licensee and lead from the front.”
Nett Assets
“I can highly recommend Capstone for planners seeking an independent licensee that’s not in your face but provide quality support services. Their service and support is second to none and has allowed us to concentrate on providing our clients with a premium level of service.”
Paradigm Principle
“Having been with Capstone for a number of years, one thing that really stands out is their willingness to help and can do attitude. These are qualities we really appreciate.”