Stock Market Wrap-Up – December 2017


The S&P/ASX 200 Accumulation Index was up 1.81% during the month. The Australian equities market was driven higher by gains in Energy and Materials stocks, which were buoyed by rising commodity prices.

Globally, equity markets ended the year at record highs. Emerging markets outperformed developed markets during the month. Amongst developed markets, the UK’s FTSE 100 led gains, returning 4.9% in December. In the US, the S&P 500 was up 1.0%. Japan’s Nikkei 225 was only marginally positive, finishing up 0.2% in December. The Euro Stoxx 50 was the laggard, falling 1.8%.

During December, the Reserve Bank of Australia (RBA) maintained the cash rate at 1.50%, for the 16th consecutive month. The RBA continues to maintain it’s view on the economy; global growth remains positive, domestic business conditions will continue to improve further with faster growth in non-mining business investment expected. The labour market continues to improve with unemployment at a four-year low. House prices are easing, especially in Sydney and although growth in household credit had slowed, the RBA still has concerns for household balance sheets.

In local economic news, Q3 GDP rose 0.6% for the quarter with the annual rate rising 2.8%. Retail sales rose 0.5% in October. Employment data rose by 62,000 positions in November, taking annual job growth to 380,000 positions. The unemployment rate remained steady at 5.4%. The NAB business survey eased with confidence slipping from +9 to +6 in November. The Westpac Consumer Confidence Index rose 3.6% to 103.3 in December, the highest level since January 2014.

In stock specific news, Westfield Corporation outperformed having agreed to a USD 24.7 billion takeover from French property firm Unibail-Rodamco. ANZ announced the sale of its Australian Life Insurance business to Zurich Financial Services and also announced an AUD 1.5 billion on-market buyback. Ardent Leisure outperformed having announced the sale of its Bowling & Entertainment Division for AUD 160 million, simplifying the company down to two divisions: Theme Parks and Main Event.

The majority of sectors were positive over the month. The best performing sectors were Energy (6.4%), Materials (6.2%) and Telecommunications (5.5%). The Consumer Discretionary (3.8%) sector also outperformed the broader index. Sectors that lagged the broader market included Consumer Staples (1.6%), Financials (0.4%), Real Estate (0.5%), Health Care (-0.5%) and Industrials (-1.2%). Utilities (-4.5%) was the worst performing sector during the month.

The Energy sector was the best performer in December, as the oil price continued to rise buoyed by ongoing geopolitical risks in major oil producing regions, OPEC compliance and strong demand. Sector gains were driven by Woodside Petroleum (6.7%) and Oil Search (10.9%).

The Materials sector outperformed on the back of higher commodity prices. All major commodities were higher during December with coking coal the top performer, surging 23.1%. The key stocks driving sector outperformance were BHP (8.3%) and Rio Tinto (6.9%).

The Telecommunications sector outperformed driven by sector heavyweight Telstra (5.8%). Telstra rebounded in December as the stock found yield support. It was also helped by an announcement from the company clarifying the impact from the delay in the NBN roll out.

The Healthcare sector lagged, with Cochlear (-5.3%) and Resmed (-2.1%) leading the sector lower.

The Industrials sector underperformed the broader market, dragged lower by transportation stocks. Qantas Airways (-11.1%), Aurizon Holdings (-5.9%) and Sydney Airport (-2.5%) were the key detractors from sector performance.

The Utilities sector was the worst performer, largely due to underperformance from APA Group (-8.6%). The APA Group share price retreated following profit taking early in the month.