The Australian share market built on its June post-election gains, to once again lead the world’s major developed markets. Buoyed by a second 25 basis point interest rate cut by the RBA and the passage through parliament of the re-elected Morrison government’s personal income tax cuts, the local market improved 2.9%, driven by consumer staples and healthcare stocks. The Australian market is now up close to 25% since late 2018 and approaching its all-time high.
The US market improved 1.3% on expectations of a rate cut by the Fed (ultimately delivered late in the month) in addition to strong employment data. Optimistic second quarter earnings expectations buoyed the tech sector with heavyweights such as Apple, Intel and IBM leading the way.
The UK market improved following the Conservative Party’s election of former London mayor and Brexit hardliner Boris Johnson as the new Prime Minister, who has committed that the UK will leave the EU by no later than 31 October, even without a formal deal with the EU.
Bond markets once again rallied as global central banks continued their easy monetary policy stance. Following the RBA’s cut, Australian 10-year bond yields fell 18 basis points to 1.18% to be 83 basis points below its US counterpart. The lower interest rate outlook also put pressure on the AUD, which fell to below US69c providing further trade stimulus to the local economy.