Market Review - April 2024
After an exceptionally strong start to the year, asset prices retraced in April as investors rebalanced portfolios and hedged for the possibility that interest rates may stay higher for longer.
Australian Equities
The local benchmark gave back most of this year’s gains as investors grew wary of the potential for further interest rate hikes to tame persistent inflationary pressures. The S&P/ASX 200 retraced 2.92% for the month and is now up 2.24% for the year. Consumer discretionary, real estate and technology are all down 7% or more from their all-time high.
In company news, BHP Limited proposed to purchase underperforming British miner Anglo American for $60 billion. The transaction would further solidify BHP’s portfolio of low-cost iron ore and copper assets, while the platinum and diamond mines would be divested. Coles reported inflation pressures from suppliers easing, however, the two big supermarkets remain under pressure from politicians and consumers alike. The leader in sleep apnea treatments ResMed announced a 23% increase in operating income. Recent studies show that GLP-1 weight loss drugs aid demand for ResMed's devices.
International Equities
Similar to domestic equities, international shares retraced on inflation fears. The S&P 500 fell 4.11% in April and the MSCI World Index declined 3.87%. Positively both indexes remain well in the green for 2024. The Bank of Japan is expected to intervene as the Yen continues to depreciate.
Shares in Google owner Alphabet leapt 10% in a single day after reporting a 46% jump in operating income. Google Search revenues increased by 14%, YouTube revenue was up by 21% and cloud revenue jumped by 28%. Amazon announced its cloud business has a US$100 billion run rate, despite 85% of IT spending remaining on-premise. Eli Lilly's quarterly earnings increased 66%. Sales of their flagship weight loss drug Mounjaro more than tripled over the past year.
Cash and Fixed Income
The yield on Australian 10-year Government Bonds appreciated markedly during the month as traders priced in the prospect of higher interest rates. Overseas the yields on US 10-Year approached 4.7% and are closing in on the peak of 5% recorded in November. Bond prices move inversely to bond yields, therefore when the yield on the bond increases the price of that bond falls.
Property
Domestic residential property prices continue to shrug off higher interest rates, with all capital cities except Hobart recording an annual increase. Perth, Brisbane and Adelaide lead the gains. Industrial property saw a slight uptick in vacancies however the market remains tightly held with limited new supply. Retail continues to command investor attention, especially in the premium and high-foot-traffic segments. Office vacancies remain high at 14.8%, with landlords offering generous incentives to entice (and retain) tenants.
Source: CoreLogic
Commodities
Oil prices cooled after a strong start to the year owing to geopolitical tension in the Middle East and Europe. The gold price gave back some of its gains as rising bond yields reduced its relative attraction. Iron ore futures had their best month since June 2023 after the Chinese state instructed local governments to accelerate construction projects. Copper also continued its strong run driven largely by limited mine supply and new investment. After the stellar rise, at one point increasing 500% over the past two years, cocoa prices melted down 30% in what appears to be profit-taking by traders.
