June Market Update Overview
- The recovery in equity and commodity prices from February lows continued into May with the third straight month of equity and commodity price rises.
- Oil prices continued to move higher, up another 7% in May. Iron ore prices gave back their recent gains with a 24% decline over the month.
- US economic data was fairly good leading to increased talk of impending rate hikes.
- Economic data in Europe has been stronger-than-expected, although inflation remains low.
- Australian growth was stronger than expected in the first quarter of 2016. However, pricing pressures in the economy are fairly low, reinforcing the RBA’s early May decision to cut official interest rates to 1.75%.
Developed market equities rose further in May helped by marginally better economic data, stronger commodity prices and supportive monetary policies from the US Federal Reserve and European Central Bank.
In the United States, the unemployment rate fell from 5.0% in April to 4.7% in May and wages rose more than expected to be up 2.5% over the past year (compared to the same period to May 2015).
Core inflation ticked up a little – from 0.7% year-on-year in April, to 0.8% in May, and the unemployment rate remained steady.
Data in the past month has been underwhelming. Manufacturing surveys showed flat to slightly weaker activity levels. Likewise, growth in industrial production, retail sales and fixed asset investment eased slightly.
In Japan, first quarter GDP growth rose from -0.4% in the fourth quarter of 2015, to +0.4%, in the first quarter of 2016, which was better than expected due to stronger household consumption and stronger net exports. .
March quarter Gross Domestic Product (GDP) growth was stronger than expected. The Australian economy grew 1.1% over the quarter and 3.1% over the past year, which was the highest annual growth rate in three-and-a-half years.