The Australian share market consolidated recent gains during in October.
The All Ordinaries Index gained 2.1% to close at 4,733.4 points. Global markets generally performed similarly in October with the Dow Jones Index gaining 3.1%, the FTSE gaining 2.3%, and the Hang Seng gaining 3.2%. Japan was an exception, with the Nikkei 225 Index falling 4.2% for the month.
During October the major Australian banks reported their earnings, with solid results across the board.
Bank earnings results have re-ignited a political debate in relation to competition in the Australian banking sector. Although the resilience of the Australian economy throughout the Global Financial Crisis is largely due to the strength of our financial system – this is something that ought not to be forgotten. Moves to increase competition should be tempered with maintaining sound lending practices.
The main talking point throughout the month has been the strength of the Australian dollar. We briefly reached parity during the month (i.e. 1 Australian Dollar was equal to 1 US dollar). The main driving force behind the recent strength in the currency has been high interest rates (and expectations of continued increases) as a well as demand for commodities.
Whilst a strong Australian Dollar is great news for overseas travellers, spare a thought for export industries like tourism and agriculture. I see tourism struggling as an industry for the foreseeable future as the strength of the dollar will act as a deterrent for tourists, in addition to the relative weakness in the European and US economies. Furthermore, domestic tourists will be incentivised to look abroad as they get more ‘bang for their buck’.
The Reserve Bank of Australia kept rates on hold in October and will meet tomorrow to assess rates again. Tomorrow is Melbourne Cup day; the RBA will nevertheless make its decision at 2.30pm ahead of the jump. Recent weaker than expected inflation results provides hope that rates will remain on hold.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.