February Stock Market Update

Vaccinations continue climbing 

• Global shares rose 2.7% and 1.6% in hedged and unhedged terms, respectively. The rotation to stocks benefitting from a strong economic recovery persisted into February. A rally in oil and other commodity prices boosted returns for energy and mining stocks.
• Australian shares underperformed global shares rising 1.5% in February. The market was led by strength from the mining (up 7.2%), financial (up 4.5%) and energy (up 2%) sectors. Energy stocks rose in line with continued strength in oil prices as investors anticipated economic recovery (and higher oil demand) after vaccination rollout. Renewed interest in renewable technology and electric vehicles drove a bid for copper and nickel miners such as IGO Ltd (+9.5%).
• The Australian dollar (AUD) rose 2.4% against major currencies and 0.8% against the US dollar.
• Fixed-income returns were negative as bond yields rose. Riskier corporate bonds outperformed as investor conviction in economic recovery intensified while government bonds were sold off with the Australian government bond index down 4% in February.

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As economic momentum builds

Globally

• Coronavirus case growth globally has slowed although we have seen upticks in Europe and emerging market countries. Europe has been plagued by a slower vaccine rollout than other developed countries such as the US and UK.
• The Global Manufacturing PMI survey (a proxy for manufacturing sector strength) rose to a three-year high in February.

Locally

• The RBA left interest rates on hold at 0.1% and announced a further $100bn in bond purchases at its February meeting. In its March meeting, the RBA restated its expectation of leaving interest rates unchanged until at least 2024. Amidst the substantial fall in bonds, it brought forward bond purchases to limit the scale of the selloff in longer-duration bonds (the 10-year bond recorded its largest monthly rise in over 25 years) and signalled its willingness to intervene further if required.
• The unemployment rate fell to 6.4% in January, pleasingly continuing to decline from its high of 7.5% in July thanks to continued strong jobs growth and government stimulus spending.
• Chinese bans on Australian coal and tariffs on wine imports persisted with Australian exporter Treasury Wine Estates (Penfolds producer) axing up to 60 roles in its China business in response.

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Major asset class performance