Economic Review

11 Jun

Economic Review

Global Equity Markets 
Global shares continued their strong gains in May. Robust profit results, progress with
vaccinations and supportive comments from the key central banks were major positives for
global shares.

Wall Street made new record highs given rapid vaccinations, robust US corporate profit
results and supportive policy measures by the US central bank. For the March quarter,
estimates show an extraordinary 50% annual increase in US corporate profits. The Federal
Reserve also provided guidance that the accommodative stance of monetary policy would
continue in terms of low interest rates and government bond purchases. However inflation
risks are building with rising commodity prices and supply disruptions for key materials such
as computer chips. US consumer price inflation was running at 4.2% in April, the highest in
the past thirteen years. This suggests that the current tailwinds of strong corporate profit
growth and low interest rate settings for US shares should moderate over coming years.

European shares made strong gains in May. Progress with vaccinations and the gradual
relaxation of lockdown restrictions proved encouraging for European share prices. Positive
results for May’s business surveys and the European Central Bank’s guidance to maintain
low interest rates were also supportive.

Asian share markets were also positive. The Chinese market benefitted from strong activity
results for Chinese industrial production and retail sales. Japanese shares were resilient
despite concerns that the ‘state of emergency’ has been extended to 20 June, curtailing
social activity in key cities such as Tokyo.

Table 1: Global share market performance – May 2021
US S&P 500 0.7%
US Dow Jones 2.2%
Euro Stoxx 50 1.6%
German DAX 1.9%
UK FTSE 100 1.1%
Japan Nikkei 225 0.2%
China Shanghai Composite 4.2%
Source: Factset, IRESS, May 2021

Australian share market review
Australian shares made healthy gains in May. Bank shares delivered strong returns given
solid profit results for the half year on low funding costs and declining debt impairment costs.
Consumer discretionary and healthcare also made solid gains with consumer optimism on
the Australian economic recovery. Sectors that disappointed included information technology
which essentially reversed all of the previous month’s gains. Utilities also fell sharply.

The Australian Dollar (AUD) gained against the US Dollar (USD), rising by 0.2% during May,
to finish the month at USD0.7730.

Table 2: Australian share market performance – May 2021
S&P/ASX 200 Accumulation Index 2.3%
S&P/ASX 200 Industrials Total Return Index -2.6%
S&P/ASX 200 Resources Total Return Index 1.3%
S&P/ASX Small Ordinaries Total Return Index 0.3%
S&P/ASX 200 A-REIT Total Return Index -1.7%
Source: Factset, IRESS, May 2021

Large Caps (S&P/ASX100)
ALS Limited was the strongest performer (+17.5%) in May. Also strong were Evolution
Mining (+16.9%) and Treasury Wine Estates (+15.9%). The weakest performance came
from A2 Milk (-23.6%) followed by Afterpay (-21.1%) and TPG Fisher & Paykel Healthcare (-

Listed property
The S&P/ASX 200 AREIT Total Return Index posted a 1.7% increase in May, below the
2.3% increase in the S&P/ASX 200 Total Return Index. All sectors posted increases, led by
Industrial AREITs (+2.9%) and Office (+2.7%). Diversified AREITs rose by 1.1% with Retail
sector AREITs just positive at +0.5%.

Written 3 June 2021.

Important Information
The information contained on this web page must be read in conjunction with the Disclaimer for Economic Outlook and Review.