As indicated above, the Australian share market delivered excellent performance relative to other developed markets in January (bested only by Portugal which gained 6.1%). This is remarkable when you consider that Australia is reeling from the bushfires and is massively exposed to China – the epicenter of the coronavirus outbreak. Perhaps Aussies are looking towards the trading opportunities offered by a Post-EU Britain. Back in the early 1970s Australia exported thousands of tons of butter and sugar to the UK – today the figure is zero. Exports of wheat and beef to the UK have also almost disappeared.
Other markets with positive moves in January were: New Zealand (+ 3.5%;) Denmark (+3.1%); Finland (+2.5%); Canada (+1.4%); Switzerland (+0.4%); Sweden (+0.2%) and the US (+0.1%). Some of the negative movers were: Hong Kong (-4.8%); UK (-3.4%); France (-2.3%); Singapore (-2.1%); Norway (-1.9%); Netherlands (-1.8%); Germany (-1.8%); Spain (-1.6%); Japan (-1.6%) and Italy (-1.3%). (Source: MSCI local currency price indices).
Bond markets, at the benchmark 10-year maturity, saw significant yield falls over the month – no doubt reflecting a flight to quality as the potential global reach and impact of the coronavirus became apparent. In the US the yield fell from 1.9% to 1.5%; UK from 0.82% to 0.54%; Canada from 1.7% to 1.32% and Australia from 1.37% to 0.96%. In Germany and Japan, the yields fell deeper into negative territory: to -0.44% and -0.05% respectively (Source: Datastream).
All forecasts, such as those we quote from the IMF and World Bank, are potentially already out-of-date because of the coronavirus. Its economic impact could be sizeable. We should know more when we put pen to paper at the end of February.