The Australian Share Market finished in the black again in August, with the S&P/ASX200 benchmark index finishing the month 1.64% higher. This brings gains for the two month period of the 2013/14 financial year up to 6.84% which is very positive.
Consumer Discretionary was the strongest performing sector for August, up 5.5%. The Energy sector was a close second posting gains of 5.4% for the month. REITS (listed property) was the poor performer for August finishing the month down 0.2%.
Interestingly the Australian Share All Ords Index outperformed the Dow Jones index by 6.23% for August. This outperformance of the All Ords over the Dow Jones is the largest we have seen for 4 ½ years (February 2009).
Reporting season has now wrapped up with companies continuing to be cautious in their forecasts for the economy and providing limited detail in their outlook statements. The reporting season confirmed a sluggish backdrop for corporate earnings, with a key focus on costs and efficiency.
Over the reporting period, BHP Billiton reported underlying earnings of US$11,798m, which is down -31% from the previous year. On the other hand CBA reported a net profit after tax (NPAT) of $7,677 million, which represents an 8% increase on the prior year. Woolworths also reported a NPAT of $2,259.4 million, up 24.4%.
The big issues that are affecting the market at the moment are:
- Impact and timing of tapering in the USA (when the Fed starts tapering back its bond buying program)
We expect the market to be volatile over September and October however the combined effects of lower interest rates, lower Australian Dollar, the election out of the way and an improving global economy and a positive stock market will make for a better than expected Aussie economy in 2014.
Interest rates were again left on hold this month with further cutting expected later in the calendar year. Please see below consensus predictions on interest rates over the coming quarters: