Market Update February 2021

Global equity markets performed strongly over the month of February as the number of COVID-19 cases around the world reduced significantly, while government and central bank support for markets remained accommodative. 

The value of the Australian Dollar broadly increased against major currencies, reducing the returns of overseas investments when measured in Australian dollar terms. Global investment grade credit spreads contracted over the month (i.e. the market’s perceived risk of lending to high quality companies decreased).

The Reserve Bank of Australia (RBA) held their first meeting for the calendar year on 2 February. The minutes of the RBA meeting noted that the recovery from the COVID-19 shock had been faster than expected in the second half of 2020, the unemployment rate appeared to have passed its peak and that the expiry of the JobKeeper program at the end of March was a cause for concern. The longer-term growth outlook was diminished by the RBA after commenting that Australia has the lowest rate of population growth since World War 1 and that international borders are likely to remain closed throughout 2021, limiting immigration. In conclusion, the RBA reaffirmed their existing policies and agreed to purchase additional government bonds when the existing bond purchasing program winds up in April 2021 [1].

The United States Democratic party introduced a US$1.9 trillion stimulus bill to Congress in late February through a budget reconciliation process. This bill is in addition to the roughly $4 trillion of stimulus approved last year to combat the economic effects of the COVID-19 pandemic. It also provides funding for direct stimulus payments to citizens, extends unemployment benefits and insurance, and provides additional funding for the vaccine program, and includes other provisions for state and local aid. The most contentious aspect of the bill is a proposal to increase the minimum wage to $15 an hour by 2025. The House passed the $1.9 trillion stimulus package bill on 28 February (amounting to approximately 9% of GDP). The bill will now move to the Senate for a vote.

Chairman of the Federal Reserve, Jerome Powell, made a speech on 10 February (US time) titled “Getting back to a strong labor market” [2]. The speech outlined the trajectory of the United States economy over the past 12 months and then finished with an analogy to challenges faced when rebuilding the economy after World War 2. Chairman Powell concluded by reiterating the commitment of the Federal Reserve to achieving maximum employment even at the expense of mild inflation and noted that it will take more than supportive monetary policy to achieve this goal.


Reported global coronavirus case numbers exceeded 113 million at the end of February 2021, with a total of over 2.5 million fatalities [3]. From a peak on 8 January, reported global daily new cases of infection dropped to levels of approximately 400,000 towards the end of February, or half of the peak in January. No country in the top 20 of total infection cases (as at the end of February) saw a new peak in daily cases during February. 

Australia saw zero deaths due to COVID-19 during February. However, there were pockets of infection that led to Victoria returning to a relatively hard lockdown for 5 days beginning at midnight on 12 February. On 16 February, the Therapeutic Goods Administration provisionally approved the AstraZeneca vaccine for use in Australia, the second vaccine to receive regulatory approval (after Pfizer/BioNTech). On 22 February, Australia began its vaccination program with the first person, a frontline worker, receiving the Pfizer mRNA vaccine.


 Major foreign equity markets produced strong positive results throughout February. Developed markets (excluding Australia) returned 2.7% on a currency-hedged basis (and 1.6% in Australian dollar terms), outperforming emerging markets which returned 1.0% in local currency terms. Of the major markets, the best performer (for the third consecutive month) was Japan (Nikkei 225 Index) which returned 4.8% for the month.

The Australian stock market (ASX 200 Index) generated a return of 1.5% during February, despite only 3 out of 11 sectors contributing positive returns. Materials, Financials and Energy were the top performers returning 7.2%, 4.5% and 2.1% respectively. Information Technology and Utilities were the worst performing sectors returning -9.1% and -8.8% respectively.

In contrast to the Australian stock market, 8 sectors in foreign developed markets produced positive returns. Energy was the top performing sector for the second consecutive month, followed by Financials returning 15.3% and 9.9% respectively. The sectors that performed the worst were Utilities, Health Care and Consumer Staples which returned -5.9%, -2.6% and -2.5% respectively.


The Australian government bond yield curve steepened significantly, the most of any major developed country, throughout the month of February with the two-year yield increasing by 0.014% and the ten-year yield increasing by 0.78%. The cash rate set by the RBA remained unchanged at 0.1% throughout February.
Major developed global government bond yields increased over the two-year and ten-year terms. The United Kingdom’s government bond yield increased the most over the two-year and ten-year terms by 0.23% and 0.49% respectively.


The Australian dollar strengthened against all major currencies due to an increased appetite for risk, with the exception of the British Pound where the Australian dollar fell 0.8% over the month of February. The AUD increased by 2.9%, 2.6% and 1.5% against the Swiss Franc, Japanese Yen and the Chinese Renminbi respectively.

The Australian Dollar finished the month at 0.7711 US Dollars, up 0.7 US cents over the month, although at one stage did break through the psychological 0.80 US Dollar barrier. 


WTI oil rose 17.8% and the price of Brent crude oil increased 18.3% over the month due to increased global demand from reopening economies, both finishing above US$60 a barrel. The S&P GSCI Industrial Metals index increased 10.7% on average, with copper being the strongest performer, rising 15.1%. Regarding precious metals, the price of gold decreased 6.1% and the price of silver decreased by 1.2% for the month of February. 

Performance of key markets to 28 February 2021

Asset class Index Month* (% change) FYTD* (% change) 1 year* (% change)
Australian Shares S&P/ASX 200 Acc. Index 1.5% 15.2% 6.5%
International Shares MSCI World Ex Aust Unhedged A$ 1.6% 11.0% 7.8%
International Shares MSCI World Ex Aust Hedged A$ 2.7% 21.1% 23.5%
US Shares S&P 500 Index 2.8% 24.3% 31.3%
UK Shares FTSE 100 Index 1.6% 7.2% 1.3%
Japanese Shares Nikkei 225 Index 4.8% 31.0% 39.6%
Australian Listed Property S&P/ASX 200 A-REIT Index -2.6% 13.2% -12.0%
Australian Fixed Interest Bloomberg AusBond Composite Index -3.6% -3.1% -2.8%
Australian Cash Bloomberg AusBond Bank Bill Index 0.0% 0.0% 0.2%
Currency AUD/USD 0.9% 11.7% 18.4%

*Percentage change in returns are for periods over the month of February (Month), the financial year 1 July 2020 to 28 February 2021 (FYTD) and for the year 1 March 2020 to 28 February 2021 (1 year). Past performance is not an indication of future performance.


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