Global markets were relatively flat over the month of February 2016, despite a push in the last two weeks for several major equity markets. Bond markets continued to provide a modest safe haven for investors with the Citibank World Government Bond Index returning 1.4% over the month. United States (US) equities recorded a small negative return and Federal Reserve (Fed) Chair, Janet Yellen, warned that global financial market turbulence could set back US growth. The stance of US monetary policy remains quite accommodative in order to support further improvements in labour market conditions and a return to 2% inflation.
Australian Equities brought flat returns over February as the S&P/ASX 300 Accumulation Index fell 1.7%. From a sector perspective, Materials (+9.1%), Industrials (+5.8%) and Property Trusts (+2.8%) were the strongest performers, while Financials ex Prop (-7.0%), Telecom Services (-5.5%), and IT (-5.5%) were the weakest. The Australian Small Companies Index outperformed Australian large caps, with a return of 1.0% for the month.
Global Equities returned -1.4% in hedged (Australian dollar) terms, and -1.7% in unhedged (Australian dollar) terms as the Australian dollar appreciated against the US dollar over the month. Global Small Caps outperformed the broad cap index returning -0.3%, while emerging markets retraced further, returning -1.1% (both in Australian dollars unhedged). In the US, the S&P500 returned -1.1%, while the NASDAQ returned -1.2% in US dollar terms. Outside of the US, Japan returned -9.3%, the United Kingdom (UK) 0.8%, India -8.1% and Germany -3.1%, all in local currency terms. In other regions, China fell 1.8% while Hong Kong fell 2.9% (returns in local currency terms). Across the sectors, Materials (+5.3%), Industrials (+1.3%), and Telecommunication Services (+0.2%) were the strongest performers, while Financials (-4.4%), IT (-2.4%) and Healthcare (-2.2%) were the weakest (all in Australian dollar terms).
Over February, the Australian dollar saw mixed results with falls of -5.2% against the Japanese Yen, but gains against the Pound Sterling (+4.1%), Euro (+0.5) and the US dollar (+1.0%), finishing the month at USD0.714 on 29 February 2016. On a trade-weighted basis, the Australian dollar fell 0.2% for the month.