Equity market volatility picked up last week as the Turkish lira plunged and global trade concerns continued. The S&P 500 fell by 0.3%, despite strong earnings from U.S. companies and positive economic data. Small-caps outperformed, with iShares Core S&P SmallCap ETF (IRJ) returning 2.3% for the week. The S&P/ASX 200 added 0.7% last week, with financials and real estate sectors being the main contributors. The EURO STOXX 50 declined by 1.6% on concerns around bank exposure to Turkish credit. Chinese equities bounced on growth expectations, with the Shanghai Composite adding 2.0%. China-focused ETFs (IZZ and CETF) were the top performing funds for the week.
The Turkish lira declined by 21% last week, pushing the U.S. dollar higher against most currencies. The DXY U.S. Dollar Index added 1.3% as the Australian dollar fell by 1.4% to U.S.73c and the euro fell 1.3%. Bonds rallied, with U.S. 10-year Treasury yields falling by 8 basis points.
Commodities mostly declined last week on U.S. dollar strength. Despite the rising volatility in equity markets gold continued to fall, dropping 0.4% for the week to US$1,211/bbl. ETFS Physical Gold (GOLD), which is priced in AUD, returned 0.9% for the week.
The Australian ETF market saw inflows of $207m into and outflows of $129m from domestically domiciled funds last week. The largest inflows were into BetaShares Australia 200 ETF (A200) and a range of cash and fixed income funds (FLOT, BILL, QPON and PLUS). The largest outflows were from domestic equity funds; SPDR S&P/ASX 200 Fund (STW) and BetaShares FTSE RAFI Australia 200 ETF (QOZ).