The S&P/ASX 200 Accumulation Index gained 1.0% during the month.
Equity markets initially drifted lower, weighed down by a lack of confidence in the Trump ‘reflation’ trade and rising geopolitical tensions, but then rallied in the latter half of the month.
Globally, the Euro Stoxx 50 led the moderate gains during the month climbing 2.0% on the back of stronger economic data and the outcome of the first round of the French Presidential elections which alleviated fears of increased momentum against the European Union. Japan also performed well with the Nikkei 225 returning 1.5% during the month. The S&P 500 was also up, returning 1.0%. The UK was the laggard with the FTSE 100 down1.3% as the British Prime Minister called a snap general election to be held in June 2017, three years earlier than scheduled.
Domestically, the cash rate was unchanged at 1.50% during the month while bond yields fell across the curve. The Australian dollar weakened against most major currencies, weighed down by continuing falls in the iron ore price.
In the latest economic data, retail sales disappointed in February, falling 0.1%. Employment rebounded strongly in March, up by 60,900 positions, driven largely by full-time employment. The unemployment rate remained unchanged at 5.9%. The NAB business confidence survey retreated to +6 in March from +7 in February. Meanwhile the business conditions survey rebounded strongly in March to +14 from +9 in February.
Amongst stock specific news, Telstra suffered after TPG Telecom announced its intention to become the fourth player in the mobile phone market. Sirtex Medical was hit hard following disappointing clinical results in its liver cancer drug trial. Aurizon downgraded guidance for FY17 due to the impact of Cyclone Debbie. Coca-Cola Amatil also downgraded guidance, due to weaker than expected trading for its Australian Beverages division. Brambles provided a positive trading update, with sales revenues in the first nine months of its financial year that were above consensus expectations and confirming guidance.
Sectors were mixed during the month. The Industrials sector was the best performer, up 4.4%. Healthcare and Utilities were up 3.2% and 3.1% respectively.
REITs, Financials ex-REITs and Consumer Discretionary were the next best performers, up 2.6%, 1.9% and 1.5% respectively. The worst performing sectors included Materials (-0.2%), Energy (-0.6%), Consumer Staples (-2.6%) and Telecommunications (-9.9%).
The Industrials sector benefitted from strong gains by Brambles (10.6%) with the company releasing a positive Q3 trading update where FY17 guidance was reiterated and management showed cautious optimism on new business wins.
The Healthcare sector was driven by gains in CSL (5.8%). CSL outperformed the market despite no stock specific news. We believe the stock’s outperformance is most likely explained by a broader shift in favour of lower volatility sectors.
The Utilities sector was led higher by DUET Group (8.2%). DUET outperformed after the Foreign Investment Review Board approved the takeover of the group by Hong Kong based infrastructure giant Cheung Kong Infrastructure. The deal was overwhelmingly approved by shareholders later the same day.
The Materials sector underperformed during April, weighed down by generally lower commodity prices. Coking coal bucked the trend, up 46% due to supply disruptions following Cyclone Debbie. The Energy sector also underperformed on the back of a lower oil price, having ended the month below USD 50 for the first time in several months.
The Consumer Staples sector was dragged lower by sector heavyweight Wesfarmers (-4.6%). Wesfarmers underperformed this month following the release of slightly softer Q3 retail sales results and the official announcement that Amazon is entering the Australian market. Coca-Cola Amatil (-13.4%) also detracted from sector performance, having downgraded guidance due to weaker than expected trading for its Australian Beverages division.
The Telecommunications sector underperformed after sector heavyweight Telstra (-9.4%) fell on news that TPG Telecom had successfully bid for mobile spectrum, creating a fourth player in the Australian mobile market.
