Market Wrap September 2019

03/10/2019
Posted in Wealth
03/10/2019 Level One

Markets

  • Market Performance – The ASX200 rose 1.8% in September.
  • Sector Performance – The top performing sector for September was the Energy Sector returning 4.7% and the worst performing sector was the Communication Services Sector coming in at -2.9%.
  • Banks – All big 4 banks rose strongly during the month of September, CBA 2.3%, Westpac 5.0%, ANZ 6.7% and NAB 8.6%.
  • Global – The S&P 500 rose 1.9% in September. The Shanghai Composite Index also rose 0.66%.

 

Property

  • House Prices –Sydney was up 1.7% and Melbourne was up 1.7%. The national average decline was -3.9% over the past twelve months.
  • Household DTI – The household Debt-to-Income ratio has spiked to a world record high of approximately 201%.
  • Rental Yields – Sydney recorded the lowest rental yields at 3.2% and the highest were in Darwin at 6.0% over the past 3 months. When expenses are deducted from this, the real yield is much lower.
  • Residential Approvals – Residential Building Approvals dropped to 154,000 which represents a decline of -21.5% on an annualised basis.

 

Economy

  • Gross Domestic Product – GDP growth in the second quarter to 30 September was up 0.5% drawing annual GDP Growth to 1.4%. The weakest growth rate since the Global Financial Crisis.
  • Interest Rates – The RBA has cut interest rates to record 0.75% on 1 October 2019. UBS expect the RBA to further cut rates by another 0.25% this calendar year.
  • Bond Yield – The Australian 10-year Government bond yield held below 1.0% during the month of September at 0.96%.
  • Consumer Confidence Index – According to the Westpac Melbourne Institute the Consumer Confidence Index has dropped -1.7% over September.
  • Exports – Australia’s export share to China has grown to a record 38% ($117 billion) of total annual exports. This percentage of total exports is more than any other country.
  • Employment – Employment increased by 34,700 jobs in August. The unemployment rate increased to 5.3%. The participation rate ticked up slightly to 66.2%. Employment growth remained strong at 2.5% on an annual basis – now entirely driven by the public sector having a total share of 15.1% of total employment.
  • Exchange Rates – The Australian Dollar remained unchanged against the US Dollar at $0.674.
  • US – US jobs growth increased by 130,000 in August. The unemployment rate remained unchanged at 3.7%. The Federal reserve cut interest rates for the second time this calendar year to 1.75%.

 

Comment

The Institute of Supply Management in the US publishes a monthly index number or “PMI” which represents the level of purchasing managers orders in manufacturing in the US.

If the Index is above 50 it means purchasing managers orders in manufacturing are growing and reflects an expanding economy.

If the Index is below 50 it means the economy is contracting. Leading economists, advisers, politicians and business people watch this Index keenly as it is a very reliable monitor of what is happening in the economy.

In August 2019 the PMI Index was 49.1. This caused concern. Expectations were that in September it would bounce to 50.1.

Instead September saw it drop to 47.8.

This represents one of the biggest falls in the Index in a month ever and the lowest recorded PMI Index since the GFC in 2009.

Not surprisingly the US share market has reacted badly to the news further fanning the flames of a possible global economic slowdown or recession.

Sources: UBS, Westpac, ABS, US BLS, CoreLogic, BIS Oxford Economics.

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