The air of volatility remained over April 2018, following continued trade tensions which were escalated further under President Trump with the revelation that the United States (US) would withdraw from the Iran nuclear deal, reinstating all sanctions previously removed following agreement on the deal in 2015. European allies were disappointed, expressing their desire to commit to the deal and urging Iran to do the same. This move by the Trump government was surprising following a show of solidarity just a few weeks earlier in which the US and its European allies coordinated air strikes in Syria in retaliation to the use of deadly gas attacks on civilians.
The Australian equity market outperformed its hedged international developed counterpart index over the month, as the S&P/ASX 300 Index increased 3.8%. The S&P/ASX 50 was the strongest relative performer, increasing 4.1%, while the S&P/ASX Small Ordinaries was the weakest, increasing 2.8% over the month. The best performing sectors were Energy (+10.7%) and Materials (+7.4%) while the weakest performing sectors were Financials (+0.1%) and Telecom Services (+1.9%). The largest positive contributors to the return of the index were BHP Billiton, CSL and Rio Tinto, with absolute returns of 10.1%, 9.7% and 10.3% respectively. In contrast, the most significant detractors from performance were AMP, CBA and Boral with absolute returns of -18.6%, -0.7% and -7.3% respectively.
The broad MSCI World ex Australia (NR) Index increased 2.0% in hedged terms and 2.8% in unhedged terms over the month, as the AUD depreciated against the USD. The strongest performing sectors were Energy (+11.2%) and Utilities (+4.2%), while Consumer Staples (-0.4%) and Industrials (+0.8%) were the worst performers. In AUD terms, the Global Small Cap sector was up 2.6% and Emerging Markets increased by 1.2%. Over April, the NASDAQ remained flat, the S&P 500 Composite Index increased by 0.4% and the Dow Jones Industrial Average increased by 0.3%, all in USD terms. In local currency terms, major European equity markets experienced positive returns as the FTSE 100 (United Kingdom (UK)) increased 6.8%, the DAX 30 (Germany) increased by 4.3% and the CAC 40 (France) increased by 7.2%. In Asia, the Japanese TOPIX (+3.6%), Hang Seng (+2.5%) and Indian S&P BSE 500 (+6.5%) all increased while the Chinese SSE Composite (-2.7%) decreased over April.
The AUD depreciated against the US dollar over April, ultimately finishing with a lower Trade Weighted Index of 62.1 on 30 April 2018. The AUD depreciated against the USD (-1.6%) but appreciated against the Pound Sterling (+0.8%), the Euro (+0.3%) and the Yen (+1.2%). On a trade-weighted basis, the local currency decreased 0.3% over the month.