February 2010 investment commentary
After several months of volatility, investment markets consolidated in February as investors digested company earnings reports and awaited further clarification on potential interest rate rises. While investor sentiment appears to have improved during the month, the overall tone remains cautiously optimistic.
Share markets
Following the fall in January, the Australian share market rebounded 2.1% in February 2010. Most industrial stocks rose after reporting earnings slightly ahead of market expectations. Resource stocks regained some of their losses in January despite lingering concerns over the sustainably of Chinese economic growth and commodity prices.
Global share markets approached the anniversary of their low point during the global financial crisis. Markets were mixed with the US shares achieving gains due to a reasonably solid company reporting season. In contrast, concerns relating to the stability of Greek sovereign debt and other European Union economies adversely impacted returns from the region.
Fixed interest markets
International fixed interest markets were mixed during the month. Contrary to equities, many in the fixed interest market believe the global economic recovery remains relatively weak and short term interest rates may remain at low levels for a while yet. Investors are also concerned about the size of US and European government borrowing to support economic stimulus programs and how long the stimulus will remain in place.
Australian fixed interest and cash markets were relatively volatile at the beginning of the month due to the surprise decision by the Reserve Bank of Australia (RBA) to leave interest rates on hold. However, expectations of further interest rates increases have been priced into the market as the Australian economy remains relatively strong compared to other economies.
Property markets
Overall, global property markets remained subdued across the retail, industrial and commercial sectors with each major region experiencing different stages of the cycle. The low level of transaction activity in unlisted property has provided little guidance on whether the domestic market has bottomed. Listed property markets continued their slow process of stabilisation as stocks renewed their efforts to reduce debt and maintain occupancy levels in their buildings.
