Global equity markets experienced strong returns for the month of March, with Australia and the United States (US) reaching all-time highs for the third and fourth consecutive months, respectively. These advances reflected stronger-than-expected company earnings and an increasing confidence amongst market participants that economic growth across several countries could be maintained while inflation moderates. The value of the Australian Dollar rose in March against all major foreign currencies, decreasing overseas investment returns when measured in Australian dollar terms. Australian and international fixed interest markets posted positive returns for the month of March.

The Australian Bureau of Statistics (ABS) released data for the September 2023 to December 2023 quarter in March, which confirmed that growth has slowed. The Australian economy grew by 0.2% for the December quarter and 1.5% in annual terms. Whilst this is the ninth quarter of growth, this was the lowest annual growth rate since the global pandemic. Australian household consumption growth remains weak on the back of high inflation and interest rates. The Australian Labour Force statistics for February were also released by the ABS in March, which showed the unemployment rate unexpectedly fell by 0.4% to 3.7%, in seasonally adjusted terms. 

Global inflation has been moderating towards central banks’ targets in many advanced economies. Reported data for February showed that year-on-year Consumer Price Inflation rose 3.4% in Australia, 3.8% in the United Kingdom, 2.6% in the Euro Area and 3.2% in the US. In response to the above-target inflation rate, the Board of the Reserve Bank of Australia (RBA) announced on 19 March that it was leaving the Cash Rate Target unchanged at 4.35%, its third consecutive pause. In a media release, the RBA stated “While recent data indicate that inflation is easing, it remains high. The Board expects that it will be some time before inflation is sustainably in the target range. The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.”  

Meanwhile, for the first time in 17 years, the Bank of Japan (BoJ) increased short-term interest rates from -0.1% to a range of 0% to 0.1%. The Bank also ended its Yield Curve Control policy, which was introduced back in 2016, as well as the strategy to buy risk assets such as Exchange-Traded Funds and Japan Real Estate Investment Trusts, which was adopted in 2010. In a press conference, the Governor of the BoJ, Kazuo Ueda, acknowledged that the bank was “not 100% yet” in achieving its inflation target, however it was confident about the recent wage-price virtuous relationship which will lead inflation to staying sustainably above a 2% target. 

Equities

Major developed foreign equity markets rose in March with developed markets (excluding Australia) returning 3.3% on a local currency basis (and 3% unhedged in Australian dollar terms, reflecting a rise in the value of the Australian dollar). The best performing major foreign equity markets were the UK stock market (Financial Times Stock Exchange 100) and the European stock market (Euro Stoxx 50) returning 4.8% and 4.3% (in local currency terms) respectively in March. 

The Australian stock market (S&P/ASX 200 Index) returned 3.3% for the month, with ten industry sectors experiencing positive returns and one industry sector experiencing negative returns. Real Estate was the standout performing sector, returning 9.2%. The sole detractor was Communication Services, which returned -1.1%.

In overseas developed share markets, all 11 sectors produced positive returns for the month. The standout performers were Energy, Materials and Utilities, returning 9.2%, 6.7% and 5.9%, respectively. The lowest performing sector was Consumer Discretionary, which returned 1.0%.

The Australian government bond yield curve flattened in March, with 2-year yields and 10-year yields falling by 0.04% and 0.17% respectively to finish the month at 3.76% and 3.96%, respectively. Australian fixed interest returns for March were 1.1% (Bloomberg AusBond Composite Index).

Meanwhile, major developed global government bond yields broadly fell, particularly over longer terms, leading to an increase in the Bloomberg Global Aggregate Index (Hedged) of 0.8%. The 10-year UK government bond experienced the largest drop,  falling 0.19% from 4.1% to 3.9%.

The Australian Dollar rose against all other major developed foreign currencies, increasing by 0.4% against the US Dollar, 1.2% against the Japanese Yen and 2.2% against the Swiss Franc. The Australian Dollar finished the month at 0.6521 US Dollars.

Commodity prices were mostly positive over the month of March, and the S&P GSCI Commodities Index ended the month up 4.4%. The price of WTI oil and Brent oil rose 6.3% and 4.6%, respectively. Notably, Iron Ore and Natural Gas fell 17.6% and 5.2%, respectively. Of the precious metals, the price of gold and silver rose 9.1% and 10.1%. 

Performance of key markets over relevant time periods to 31 March 2024:

*Percentage changes in returns are for periods over the month of March (Month), financial year to 31 March 2024 (FYTD) and the prior 12 months, to 31 March 2024 (Prior 12m). Past performance is not a reliable indicator of future performance.