The Australian share market stormed out of the gates in 2020 leading the developed world by posting an impressive gain of 4.7% building on its strong performance in 2019. The US market was essentially flat however technology shares faired a little better propelling the NASDAQ 2% higher. The spread of the coronavirus spooked Asian markets in particular with Hong Kong feeling the brunt – down 6.7%, and mainland China falling 2.3% (also falling sharply in early February).
Despite the UK Parliament formalising its exit from the EU, the UK market was 3.4% weaker while Europe declined 1.9%. Investors took refuge in government bond markets pushing the Australian 10-year yield down 42bp with US Treasury yields also lower. The prospect of economic weakness in China pushed the AUD down 4.8%, while commodities were hard hit with oil down 16.4% and copper 9.5% weaker. The lower currency together with marginally stronger employment and slightly higher inflation provided enough cover for the RBA to keep cash rates on hold at 0.75%.