Global developed markets were positive in January. The MSCI World Index (hedged into AUD) was up +1.7%. Over a rolling 12 months, this Index has returned +17.1%.
USA
U.S. equity markets rose, but did not perform as well as other Developed markets. The S&P 500 rose +1.5%, which was behind markets in Europe, Asia‑Pacific and Emerging Markets, as returns broadened beyond U.S. mega‑cap stocks. Software companies performed less well as markets considered the competition coming from AI.
The inflation data released in January was cooler than expected. The unemployment rate is relatively higher than the previous year, but is slightly lower this month, at 4.4%, than last month. The Federal Reserve bank kept rates steady at their January meeting as was widely expected (kept at 3.5-3.75%).
Asia
Equity markets delivered broadly positive local‑currency returns, with the best performance in markets in the north of Asia. Korean equities significantly outperformed, up +28.0% during the month, driven by a sharp rally in technology and semiconductor stocks with continued strength in AI‑related investment. Taiwanese equities also performed strongly, benefiting from the same drivers.
Europe
European equities recorded good gains. The MSCI Europe Index (in euros) rose 3.1%. Performance was supported by strong gains across key sectors, including financials, industrials and technology.
Australia
Australian equities rose +1.7%. This was due in part to the strength in cyclical sectors outweighing weakness in interest-rate sensitive sectors and IT. The energy sector led the gains (+11.1%). The materials sector rose by +9.4%, due to higher oil and bulk commodity prices. An interest rate rise continued to be widely expected, and this was announced by the RBA following its February meeting.
Currency and bonds
Bond yields were higher over January. The Australian 10‑year government bond yield rose around 5 bps to 4.80%. Ongoing domestic inflation pressures and expectations that rates may remain higher for longer were key considerations. The U.S. 10‑year Treasury yield rose by 9 bps to 4.26%. Australian bonds and global bonds both delivered small positive returns of +0.2%.
The AUD rose by 5.1% against the USD in January, as a result of higher commodity prices and rate expectations. The USD weakened against most major currencies.