Equity markets’ returns were broadly positive in April as levels of employment have so far proved resilient to Central Bank interest rate hikes. The value of the Australian Dollar decreased against the majority of foreign currencies, increasing overseas investment returns when measured in Australian dollar terms. International and Australian fixed interest markets posted modest positive returns with changes in bond yields mixed between jurisdictions.

The Board of the Reserve Bank of Australia (RBA) met on 4 April to discuss global and domestic economies and markets, and to review their monetary policy. The Board minutes noted “inflation remained too high, the unemployment rate was very low and surveyed business conditions were still strong. At the same time, there had been a material slowing in the growth of consumer spending”. The cases for either a 25 basis point rise and holding the cash rate target unchanged were discussed and members “agreed that there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings”. The cash rate target was unchanged at 3.6%, the first major central bank to pause hiking this cycle. On 2 May, whilst not in the timeframe captured by this commentary, the RBA increased the cash rate target by 25 basis points to 3.85%.

 On 20 April a review of the RBA was published by the Government titled “An RBA fit for the future”. A number of recommendations were made such as: establishing a separate board for monetary policy and governance of the Bank, reducing the frequency of monetary policy meetings, and taking account of climate change without using monetary policy. Some of the recommended changes would require legislative approval.

Global inflation continued to remain elevated throughout April as reported numbers for March were published. In March, the Consumer Price Index rose 10.1% year-on-year in the United Kingdom, 8.3% in the European Union, 7.0% in Australia, and 5.0% in the United States. Central Bank forward guidance on the future path of interest rates still varies from bank to bank, however bond market participants in aggregate are currently pricing in all major Central Banks to pause and eventually cut target cash rates by the end of 2024.

President of the United States Joe Biden, formally announced his candidacy to run for a second consecutive term as president in 2024 in late April. The previous president, Donald Trump, has also announced his presidential bid in 2024 and currently political commentators suggest it’s likely that each will win their parties’ nomination, and that the general election in 2024 will most likely be a rematch between Biden and Trump.

Equities

Major developed foreign equity markets all produced positive returns in April. Developed markets (excluding Australia) returned 1.6% on a currency-hedged basis (and 3.2% in Australian dollar terms, reflecting the fall in the value of the Australian dollar). The best performing of the major foreign markets was the United Kingdom’s stock market (FTSE 100 Index) returning 3.4% (in local currency terms). 

The Australian stock market (S&P/ASX 200 Index) was positive during April returning 1.8%, with 10 out of 11 industry sectors experiencing positive returns. Real Estate, Information Technology and Industrials were the standout performing sectors returning 5.1%, 4.8% and 4.4% respectively. Materials was the sole negative performing sector returning -2.6%.

From a foreign developed market perspective, 8 out of 11 sectors produced positive returns, whilst 2 were relatively flat and 1 was negative. Consumer Staples and Energy were the best performing sectors producing returns of 3.7% and 3.6% respectively, whilst Materials was the worst performing sector, returning between -0.7%.

The Australian government bond yield curve shifted upwards in April, with Australian fixed interest returns for the month of 0.2% (Bloomberg AusBond Composite Index). The slope of the Australian government bond yield curve flattened marginally in April as the two-year yield increased by 0.09% and the ten-year yield increased by 0.04%.

Over April, major developed global government bond yields were mixed. The Bloomberg Global Aggregate Index (Hedged) returned 0.4%. Notably, the United Kingdom Government two-year yields increased 0.34%, the most over two-year maturities. Over the ten-year term, United States Government yields fell by 0.05%, the most of major developed governments.

Currencies

The Australian Dollar fell against all major foreign currencies in April, with the exception of the Japanese Yen which it rose 1.6% against. The Australian Dollar decreased 3.3% against the Swiss Franc, 2.8% against the British Pound and 2.6% against the Euro. The Australian Dollar finished the month at 0.6615 US Dollars, down 0.7 US cents over the month.

Commodities

Commodity prices continued to be volatile over April. The S&P GSCI Commodities Index ended the month down 1.6%, with the index swinging up over 4% and then down over 7% and then up again during the month. Notably, the price of sugar rose 20.7% and the price of iron ore fell 12.1% throughout the month. Of the precious metals, the price of gold increased 1.1% and the price of silver increased by 4.0% in April. 

Performance of key markets over relevant time periods to 30 April 2023: 

Asset class	Index	Month* (% change)	FYTD* (% change)	1 year* (% change)
Australian Shares	S&P/ASX 200 Acc. Index	1.8%	15.7%	2.8%
International Shares	MSCI World Ex Aust Unhedged A$	3.2%	17.5%	11.1%
International Shares	MSCI World Ex Aust Hedged A$	1.6%	10.6%	1.5%
US Shares	S&P 500 Index	1.6%	11.7%	2.7%
UK Shares	FTSE 100 Index	3.4%	13.2%	8.2%
Japanese Shares	Nikkei 225 Index	2.9%	11.7%	10.0%
Australian Listed Property	S&P/ASX 200 A-REIT Index	5.3%	10.1%	-9.9%
Australian Fixed Interest	Bloomberg AusBond Composite Index	0.2%	4.5%	2.1%
Australian Cash	Bloomberg AusBond Bank Bill Index	0.3%	2.3%	2.4%
Currency	AUD/USD	-1.0%	-4.2%	-6.3%

*Percentage changes in returns are for periods over the month of April (Month), financial year to date 30 June 2022 to 30 April 2023 and the prior 12 months 30 April 2022 to 30 April 2023 (Prior 12m). Past performance is not an indication of future performance.

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