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• Earnings results in focus over January• Strong start to January by US shares• US jobs report
Global sharemarkets began the first month of 2018 on a solid footing but ended January mixed as investors chose to book profits. US investors were encouraged by the reduction in corporate tax rates. Earnings results in the US and Europe were also very much in focus over the month, together with (largely buoyant) economic data and a weaker greenback.
US sharemarkets started January positively with the Dow Jones only falling twice in the first ten days of trade (each time by just 0.1 per cent) for total gains of 4.3 per cent. In fact the Nasdaq was even stronger, up 5.1 per cent.
The US jobs report (released January 5) was largely as expected with 148,000 jobs created, earnings up 0.3 per cent and unemployment stable at 4.1 per cent. The Dow Jones rose 221 points or 0.9 per cent on the day.
In contrast the German Dax rose 2.5 per cent in the first fortnight of January while the Australian market rose by just 0.2 per cent. Higher bond yields drove European shares lower over January 10 and 11.
Over the next fortnight from January 15-26, again the US sharemarkets posted solid gains of around 3 per cent. But the German Dax rose just 0.7 per cent over the period and the Australian market was largely flat.
Some US Government functions were forced to shut down from January 19-22 on the failure of Congress to pass a new funding deal. But US sharemarkets took the news in their stride. Upwardly-revised global economic forecasts from the International Monetary Fund boosted investor sentiment on January 22.
US earnings were strong over January. Reuters report that 80 per cent of companies were beating forecasts and S&P500 earnings growth was forecast at 13.2 per cent.
In the final days of January investors took some profits on the stellar gains recorded for US sharemarkets and this in turn restrained European and Asian markets.
Over January the US Dow Jones rose by 5.8 per cent. The S&P 500 lifted 5.6 per cent – the 15th straight gain and the longest winning streak recorded. And the Nasdaq rose by 7.4 per cent. Across Europe the German Dax rose by 2.1 per cent while the London FTSE fell by 2.0 per cent. In Japan, the Nikkei was 1.5 per cent higher. In Australia the ASX 200 fell by 0.5 per cent and the All Ordinaries lost 0.3 per cent.

Of the 22 sub-industry sectors, only eight posted gains in January. Retailing (up 5.0 per cent) was the best performer on the Australian market from Pharmaceutical & Biotech (up 4.4 per cent). Worst performer was Household & Personal Products (down 4.7 per cent) from Utilities (down 4.5 per cent) and Real Estate (down 3.3 per cent). There were similar declines across the size-categories from Small Ordinaries to the big-capitalisation ASX50 index.
CommSec Trading in January 2018

Originally published by Ryan Felsman – Senior Economist (Author), CommSec