Local markets shrugged off depressed confidence reflected in the NAB Business Survey for the June quarter, and instead focused on strong economic data and corporate earnings reports out of the US.

The weekly gain on the ASX 200 was +0.8 per cent - the majority of the gains generated on Friday following a host of positive US earnings reports. The positive reports triggered recently weakened commodity markets in the hope that the state of the US recovery growth is not as bad as first expected. Metals & Mining stocks rose +3.5 per cent over the week and the Materials sector gained +3.2 per cent.

Local markets shrugged off depressed confidence reflected in the NAB Business Survey for the June quarter, and instead focused on strong economic data and corporate earnings reports out of the US.

The weekly gain on the ASX 200 was +0.8 per cent - the majority of the gains generated on Friday following a host of positive US earnings reports. The positive reports triggered recently weakened commodity markets in the hope that the state of the US recovery growth is not as bad as first expected. Metals & Mining stocks rose +3.5 per cent over the week and the Materials sector gained +3.2 per cent.

Equity markets
Positive Q2 earnings reports out of the US were the fuel on the fire for markets last week. Microsoft announced its largest sales gain in two and half years, Apple exceeded analyst sales estimates and UPS posted a 90 per cent increase in annualized profit, amongst others. Of those companies that have announced since 12 July, about 85 per cent of S&P 500 companies have exceeded analysts’ per-share earnings forecasts, according to Bloomberg data.

The real positive sentiment to come out of the results was a return to sales growth. In the last year or so, profit surprises have largely been due to expense cuts, so sales-generated surprises are a positive sign for global growth.

The S&P 500 rose +3.6 per cent last week, whilst the tech-heavy Nasdaq rose +4.1 per cent.

Economic releases out of the Eurozone were also promising last week, with the latest manufacturing Purchasing Managers’ Indices (PMI) showing the region growing much faster than expected in July. The German IFO index, a key indicator of business sentiment, and UK retail sales also came in much higher than expected.

The UK FTSE rose +3.0 per cent, the German DAX rose +2.1 per cent and the French CAC 40 rose +3.1 per cent over the week.

Commodities
In a clear sign that earlier negative sentiment towards global growth prospects is fading, an index of industrial metals prices increased by +6.5 per cent last week to its highest level in two months.

Underlying the rise was a strong +8.5 per cent increase in Copper and +7.5 per cent return for Nickel. Commodity prices have been pummeled since April, so last week’s rebound only makes a small dent in the losses that have been experienced.

Currencies
Commodity prices rose and the combined effect of better risk appetite and higher commodity prices saw the Australian dollar rise strongly, hitting a high of $0.8951 against the US dollar. It is the AUD’s highest level since mid-May, when the currency was falling as the sovereign debt issues in Europe developed a head of steam.

The AUD ended the week just shy of this high at $0.8910.

Index	Close last Friday	% weekly movement	% yearly movement
ASX 200	4,458	+0.8%	+9.0%
Dow Jones	10,425	+3.2%	+14.6%
S&P 500	1,103	+3.6%	+12.6%
Nasdaq	2,269	+4.1%	+15.4%
FTSE	5,313	+3.0%	+16.1%
DAX	6,166	+2.1%	+17.9%
CAC 40	3,607	+3.1%	+7.1%
Nikkei	9,431	+0.2%	-5.2%
Shanghai	2,572	+6.1%	-23.7%
Hang Seng	20,815	+2.8%	+4.2%

In Australia, the market returned -1.3 per cent, with defensive sectors the hardest hit. Resources stocks struggled prior to the release of the findings of the Henry Tax review, as the market speculated on the negative impact that this report would have on the sector. The Healthcare sector was negatively impacted by the poor results of one of CSL’s overseas competitors, whilst Woolworth’s sales results dampened the returns for the Consumer Staples sector. Telecommunications was the only sector to post positive returns, driven by the performance of Telstra, as the market priced in the expectation of a national broadband network deal with the Government occurring in the short term. Merger and acquisition activity continued to occur in the Mining and Resources sectors, but was also at play in the Consumer Staples, Financials and Energy sectors.

Global shares markets were weak, returning -1.3 per cent, however another good month for the Australian dollar saw hedged investors return a positive 0.7 per cent for the month. It was no surprise that European markets drove the negative performance, whilst returns in China, Thailand and Japan were also negative. At a sector level, Healthcare, Telecommunications and Consumer Staples stocks underperformed, whilst the Consumer Discretionary, Industrials and Information Technology sectors outperformed. Emerging Markets continued to outperform Developed markets but returns were diverse, ranging from -6.6 per cent in Israel to as high as 10.0 per cent in Egypt.

Amidst falling local and global share markets, the property sector provided some relief for investors. Local listed property rebounded 3.9 per cent over the month, whilst Global unlisted property continued its recent upward trajectory by gaining 0.5 per cent through April.

Global bond markets outperformed Australian bond markets, in a month that saw domestic bond markets return to positive territory. Overseas markets performed better as bond yields rallied, with credit benefiting from high running yields, along with some limited spread contraction.

Market returns reflected concerns over European sovereign debt issues, particularly in Greece...

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