Research Insights | Market Commentary July 2024
Australian markets were influenced in July by a slight softening in inflation data that saw bond markets go from pricing in a potential rate hike at the next RBA meeting (5th - 6th August) to a potential rate cut by February. This lifted Australian equites to new highs and also saw bond yields fall (prices increase).
Australia’s annual headline inflation data whilst it rose to 3.8% in the June quarter (up from 3.6% in the March quarter), the core inflation number (a key focus of the RBA) fell from an annualised rate of 4.0% to 3.9% insinuating that the RBA cash hikes may have done their job.
Chinese growth ambitions softened in the month with retail sales falling due to the knock-on negative wealth effect from lower property prices and low wage growth. China still has ambitions of a 5% growth target for 2024 however the current stimulus of infrastructure investment and more recently a cut in the short- and long-term interest rates are not having the desired impact.
Australian large cap equities rose by 4.2% with strong returns from the majority of sectors. Materials and Energy were negative for the month as global growth, and particularly Chinese growth, softened lowering the prices of key commodities.
Global equities were positive in the month, with unhedged global equities up 4.0%, however many of the mega cap tech companies that have dominated the returns over the last year were mostly negative as investors used softer outlooks and potentially stretched valuations for some of these companies to rotate away and invest into the previously out of favour sectors.
The Australian 10-year government bond yield fell by 20bps to 4.12% and the Australian 2-year government bond yield fell by 29bps to 3.88%. The US 10-year government bond yield fell by 37bps to close at 4.03% and the US 2-year government bond yield fell by 49bps to 4.26%.
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