The Australian share market started the new financial year with a bang. The All Ordinaries index gained 3.7% for the month to close July at 4,135.50 points. Aussie shares have now gained 4.34% for the 2012 calendar year – a good effort given the headwinds from the euro zone debt crisis.
Global shares were also generally positive in July, with the Dow Jones Index up 1.0%, the FTSE up 1.2%, and the Hang Seng up 1.8%. The Nikkei 225 bucked the trend falling 3.9% for the month.
The cause for the sharemarket rally was once again predominantly based on talk (and some slightly positive economic news from the US)..... In late July European Central Bank President Mario Draghi noted that the ECB will do ‘whatever it takes to preserve the common-currency union’.
This was seen as a positive by those optimistic that the EU will survive and recover. However, the pessimists began to question whether this is really possible at a time when Spanish government bond yields have hit euro-era highs, and worries mount that Greece could again be forced to restructure its debt.
The problem with the persistent talk is that it is hard for investors to invest with confidence. As shown below, the Australian sharemarket has now traded in a range from 4,000 to 5,000 points for the last three years.
The positive to take from the ‘sideways’ trading is that at least the dividend yield from Australian equities has remained strong.
This week investors are focussed on the US Federal Reserve’s policy-setting committee, which commenced a two-day meeting yesterday. Recent comments from the ECB President has heightened anticipation for the Fed to signal additional stimulus moves of its own.
In interest rate news, the RBA board kept rates on hold in July, with the cash rate currently at 3.50% per annum. The RBA board meets again next Tuesday to discuss interest rates.
The Australian Dollar continued to strengthen, gaining 2.4% for the month and is currently buying US104.82 cents.
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.