Market Wrap Up April 2014

Posted in Wealth
05/05/2014 Level One

Market News

April proved to be a strong month with the Australian Share market (ASX/200) increasing 94.3 points or 1.75% to close the month at 5,489.10.The Australian share market is now trading up 2.56% for the calendar year to date.

Defensive stocks generally outperformed cyclical stocks during April with REIT’s (Listed Property) the strongest sector up 5.7% for the month. Utilities jumped 4.1%, Energy 3.5% and Consumer Staples up 3.1%.

Global equity markets generally rose throughout April with the exception of Japan, China & Russia. European markets were the strongest performer.

US markets continue to hit new highs in the face of more weak economic data and the Fed announcing further tapering to its QE program. Technology stocks slumped with technology giant Twitter’s stock now trading at its lowest price since its IPO six months ago.

The Australian dollar strengthened 0.2% to finish the month at 92.90 US cents.

UBS targets an ASX200 level of 5,700 by year-end 2014 (current level 5,489). Macquarie recently updated their Christmas 2014 ASX200 target to 5,998.


Spotlight on Macquarie Group

Macquarie Group released their full year results on Friday for the 12 month period ended 31st March 2014 with profits surging by $1.27 billion or 49%. The result sees a return to billion-dollar-plus profits and is the highest profit reported by Macquarie Group since 2008.

Macquarie also stated that they expect earnings in the year ahead to be broadly in line with the just-ended fiscal year.

Chief executive Nicholas Moore stated that all of the company’s divisions had benefited from the improvement in global markets. “Global market conditions continued to improve in FY14, contributing to a significant increase in Macquarie Group’s operating income and profit, with all of Macquarie operating groups delivering increased net profit contributions,” he said.

Mr Moore said most of the bank’s profit had come from its offshore operations, which also benefited from a lower Australian dollar.

Improved market conditions helped each of the bank’s businesses lift earnings for the year, with the capital-markets division, including currency and commodities operations, delivering sharply higher profit.

Operations in the Americas became Macquarie’s biggest income contributor for the first time as international operations accounted for 68 per cent of total income for the year.

Macquarie Group has been a participant in commodities for around 15 years. Since the GFC Macquarie has significantly expanded these activities, especially energy trading in the US. Over the last few months the US has experienced an extremely cold winter. Prolonged periods of frigid temperatures led to periods of high energy demand and resulted in spikes in energy prices. Macquarie and other energy traders were able to take advantage of this volatility and generate significant revenues. UBS estimates that Macquarie generated around $300m in revenues above usual or budget levels during these extreme US winter months.

Macquarie also announced it would pay a final dividend of $1.60-a-share for a full-year payment of $2.60, up 30% on the year before.


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