A summary of how financial markets performed in the quarter ending December 2019.
International equity markets continued their stellar run, ending the final quarter of 2019 higher, with major indices in the US again making new all-time highs. The continued rise in equity markets came as the fears of slowing global growth, and even recession chatter that dominated 2019 headlines, failed to eventuate. The good showing saw the MSCI All World Country Index finish the final quarter up 7.3%, taking its year-to-date gains to 23.7%.
More record highs in stock markets
After receding early in the quarter, US benchmark indices recovered and marched on to make fresh all-time highs. Meanwhile, tech shares continued to outperform, with the NASDAQ gaining 12.7% over the quarter.
Conservatives win UK election
On 12 December, the Conservative Party in the UK comfortably won the general election, winning 365 seats and dealing Labour its worst election showing in the post-1945 era. The result should allow Boris Johnson to pass his Brexit bill and head to Brussels to negotiate a formal exit before 31 January. From here, trade talks will begin and the UK has until 1 January 2021 to negotiate deals, which if not reached could mean the prospect of tariffs on its exports to EU countries.
Bond yields rebound
After falling to historic lows during most of 2019, bond yields across the globe bounced as the broader economic outlook improved, with growth data in major economies topping expectations. Additionally, central banks, while remaining accommodative, hinted that further cuts were, at this stage, unlikely.
New Zealand markets
After dipping in the middle of October, the New Zealand share market regained its footing and went on to reach new all-time highs in the final quarter. However, some negative news early in the quarter – namely the announcement that the Tiwai Point aluminium operation was being reviewed by Rio Tinto – saw New Zealand shares underperform global counterparts.
Business confidence rebounds
The overarching theme in the final quarter was the improvement in business sentiment. After ending the third quarter at a 10-year low, the ANZ Business Confidence rose over three consecutive months to a net -13.2%.
Reserve Bank leaves interest rates unchanged
In November, the Reserve Bank of New Zealand, somewhat surprisingly, left interest rates unchanged at its policy meeting. Despite the decision, RBNZ Governor Adrian Orr said the central bank will maintain its accommodative stance for a “prolonged period of time”. The decision to leave rates unchanged saw the New Zealand 10-year government bond yield rise 56 basis points over the quarter.
New Zealand dollar moves higher
In currency markets, the upbeat quarter saw a sharp rebound in the New Zealand dollar, which ended the period up 7.6% versus the US dollar, its highest level in five months. Elsewhere, the kiwi rose 3.4% versus the Australian dollar and 4.5% versus the euro.
Source: ANZ New Zealand Investments Limited (ANZ Investments), Bloomberg, Factset.
Market return indices: Global shares (MSCI All Country World Index); US shares (S&P 500 Index); Technology shares (NASDAQ 100 Index); UK shares (FTSE 100 Index); Chinese Shares (Shanghai Composite Index); New Zealand shares (NZX 50 Index); Global Bonds (JPM World Govt Bond Index); New Zealand Bonds (NZX New Zealand Government Stock Index); International listed property (FTSE EPRA Nareit Custom Developed Rental (ex-AU & NZ) Index); New Zealand listed property (NZX Property Index); Australian listed property (ASX 200 REIT Index). Returns are for the quarter, and are based on the stated market indices, shown in local currency terms and are unhedged, unless otherwise stated.
This document has been provided for information purposes only. While ANZ Investments have taken care to ensure that this information is from reliable sources, they cannot warrant its accuracy, completeness or suitability for your intended use. The content is intended to be of a general nature and does not take into account an investor’s, or potential investor’s, financial situation, investment objectives, or risk tolerance. Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.