Domestic equity markets finished off the year strongly in December 2015. The S&P/ ASX 300 returned 2.7%, boosted by strong performances from the Consumer Staples (+7.1%) and Consumer Discretionary (+6.3%) sectors. The Small Ordinaries returned 3.9% for the month to return a double figure result (+10.2%) for investors and remain the pick of the market capitalisation spectrum over the 2015 calendar year. Release of the November labour force data provided positive signs domestically as employment jumped by 71,000 in November after a 56,000 rise in October, with the unemployment rate falling slightly to 5.8%. As a result, investors lowered their 2016 monetary policy easing expectations as December markets priced in a 50% chance of just one rate cut over the year ahead.
Australian Equities brought generally positive returns over December as the S&P/ASX 300 Accumulation Index rose 2.7%. From a sector perspective; Consumer Staples (+7.1%), Consumer Discretionary (+6.3%) and Telecom Services (+4.3%) were the strongest performers, while Energy (-7.5%), Industrials (-0.5%), and Healthcare (0.6%) were the weakest. The Australian Small Companies Index outperformed Australian large caps, with a return of 3.9% for the month.
Global Equities returned -2.1% in hedged (Australian dollar) terms, and -2.3% in unhedged (Australian dollar) terms as the Australian dollar marginally appreciated against the USD over the month. Global Small Caps underperformed the broad cap index returning -2.9%, while emerging markets retraced further, returning -2.6% (both in Australian dollars unhedged). In the US, the S&P500 returned -1.6%, while the NASDAQ returned -2.0% in USD terms. Outside of the US, Japan returned -1.9%, the UK -1.7%, India 0.5% and Germany -5.6%, all in local currency terms. In other regions, China rose 2.7% and Hong Kong fell 0.4% (returns in local currency terms). Across the sectors, Healthcare (+1.1%), Utilities (+1.1%), and Consumer Staples (+0.5%) were the strongest performers, while Energy (-10.0%), Materials (-4.5%) and Industrials (-2.9%) were the weakest (all in A$ terms).
Over December, the Australian dollar saw mixed results, with falls of -1.6% against the Euro and -0.3% against the Japanese Yen, and rises of 3.0% against the Pound Sterling and 0.4% against the USD to finish at USD0.728 on 31 December 2015. On a trade-weighted basis, the Australian dollar rose 1.5% for the month.