Global equity markets
• Global equities continued their September rally with a broad based advance in October. Anticipation of positive effects from further quantitative easing measures, positive economic surprises and upbeat corporate earnings results were the key factors supporting markets and risky assets in general.
• The MSCI World Price Index (in local currency terms) rose 2.8% in October, while on a rolling 12-month basis this index is up 9.4%.
Australian equity market
• The Australian equity market (+1.7%) consolidated gains with the majority of the Australian market ending October higher. Commodity prices strengthened further supported by demand from emerging markets and investors seeking diversification from a weakening US dollar helping to underpin key stocks.
• Small companies outperformed their larger peers in October as investors sought earnings growth. The smaller resources and resource services companies helped lead the outperformance.
• The Australian dollar continued its march towards parity during the month, rising another 1.2% against the US dollar.
• Performance of defensive assets, such as bonds and cash, underperformed growth assets in October as investors sought out riskier assets that offered better value and potential returns.
• Global bonds beat their Australian counterparts with the Barclays Global Aggregate Bond Index (hedged in Australian dollars) adding 0.3%, but the UBS Composite Bond (All Maturities) Index ending flat. Cash maintained its defensive nature with the UBS Australian Bank Bill Index rising a consistent 0.4%.
• Quantitative easing remained the focus for bond markets during October as investors continued to speculate on the likelihood, potential magnitude and probable method for the second round of quantitative easing (QE2) by the US Federal Reserve.
Listed property trusts
• The S&P/ASX 200 Property Accumulation Index (A-REITs) fell 0.4% in October and underperformed the broader market that added 1.8%.
• Global REITs (hedged in the Australian dollar) added 3.6% in October ahead of global equities at 2.5%. Real estate markets in North America outperformed the other regions by adding 4.6%. Europe followed by gaining 3.6% while Asia markets were up at 3.0%.
Asset class outlook
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