Stock Market Wrap-up – November 2018

The S&P/ASX 200 Accumulation Index returned -2.2% during November.

The Australian equities market remained weak in the month following the battering the markets experienced in October and was the worst performing major market over the period. In major global developed markets, Japan and the US led returns with Nikkei 225 and the US S&P 500 both returning 2.0%, followed by the Euro Stoxx 50 and the UK FTSE 100, which returned -0.7% and -1.6%, respectively.

During the month, the Reserve Bank of Australia (RBA) maintained the cash rate at 1.50%. The RBA has upgraded its view on the economy with forecasts for economic growth revised upwards for 2018 and 2019. Further reductions in unemployment and a return to target inflation are also expected.

Domestic economic data releases were mixed in November. Employment rose by 32,800 positions in October (mostly in full-time positions). Meanwhile, the unemployment rate held steady at 5.0%. The NAB Survey of Business Conditions eased 2 points to +12 in October and business confidence fell 2 points to +4. Retail sales were sluggish, up 0.2% in September, which was below expectations.

In stock specific news, Woolworths announced the sale of its petrol business to European and North American convenience and fuel retailer EG Group for AUD 1.725 billion.
Sector returns were mostly negative in November. The best performing sectors were Financials ex Real Estate (1.4%), which alongside Information Technology (1.0%,) were the only positive returns this month. Real Estate (-0.4%), Industrials (-0.6%) and Utilities (-1.8%) also outperformed the market. The worst performing sector for the month was Energy (-10.3%). Consumer Staples (-3.1%), Communications (-3.2%), Healthcare (-4.0%), Materials (-4.8%) and Consumer Discretionary (-5.1%) all underperformed.

Financials was the top performing sector during November. Three of the major banks reported broadly in-line results in the context of a challenging environment. Both ANZ Bank (6.5%) and Commonwealth Bank (2.9%) rallied following their reported results.

The Information Technology sector rebounded following last months’ haemorrhaging. Afterpay (15.5%) and Wisetech Global (16.5%) were the key contributors within the sector.

The Energy sector continued its decline, continuing to be impacted by falls in crude oil prices with WTI crude oil falling 22% to USD 51/bbl. The fall was largely due to a supply spike from Saudi Arabia. Sector heavyweights Woodside Petroleum (-10.9%), Santos (-16.9%) and Origin Energy (-11.1%) were the key detractors over the month.

The Consumer Discretionary sector underperformed the market during November. Key detractors included Aristocrat Leisure (-10.7%) and Wesfarmers (-5.2%).

The Materials sector was one of the worst performing sectors this month off the back of falling iron ore, steel and alumina prices. Sector heavy weight BHP Billiton (-4.7%), South32 (-14.4%) and BlueScope Steel (-21.9%) were the major detractors within the sector.


Source: Brad Potter – Nikko Asset Management