skip to log on skip to main content

Market review

A summary of how financial markets performed in the first quarter of 2020.

Global markets

International equity markets had a tough first quarter of 2020 as the COVID-19 (coronavirus) outbreak worsened, bringing global growth and business activity to a near halt. The sharp slowdown saw investor sentiment fall, resulting in double-digit losses for most major global indices. Against this backdrop, the MSCI All Country World Index fell 20.4%, in local currency terms.

The coronavirus situation worsened throughout the quarter

The coronavirus outbreak is one of the more unprecedented events since the global financial crisis. By the end of the first quarter, the virus had spread to nearly 200 countries, infecting around 800,000 people and causing 35,000 deaths. Since then, total cases have risen to more than 2 million. The virus brought global trade and business to a near standstill as countries shut their borders in an attempt to slow the spread of the virus. The economic shock saw many businesses close shop, dampening the employment sector. In the US, this saw a record number of people (more than 3 million) file for unemployment benefits in mid-March.

Central banks and government launched unprecedented policies to combat economic slowdown

In response to the coronavirus and the slowdown in business activity, we saw unprecedented fiscal and monetary policy responses from central banks and governments in an attempt to soften the blow. In the US, the Federal Reserve cut interest rates by 150 basis points over two emergency meetings and announced further quantitative easing. And Congress passed a $2.2 trillion fiscal package, which included sending direct cheques to Americans, loan programmes for businesses and further hospital spending.

Elsewhere, in Europe, the European Central Bank announced it would offer cheap loans to eurozone banks hoping to boost lending to small-to-medium businesses.

There was a sharp rise in market volatility

As markets began to sell off, volatility surged. The VIX Index – a gauge of volatility in US equities – hit its highest level since the global financial crisis. Furthermore, US benchmark indices recorded their biggest up and down days in more than a decade during the final weeks of the quarter.

New Zealand market

The New Zealand market followed their global counterparts lower as the coronavirus outbreak brought the New Zealand economy to a halt. A sharp decline in tourism and exports – two significant sectors of the local economy – weighed on equity prices, dragging the NZX 50 to its lowest level since early 2019. Over the quarter, the NZX fell 14.8%.

Of note, shares in Air New Zealand fell 71% after the border restrictions saw domestic and international travel numbers plummet. On 20 March, the government announced it had given the airline a $900 million loan, saying the company has a “critical role in our economy and society”.

The RBNZ cut interest rates, while the government announced a stimulus program

On the back of the worsening outlook for the local economy, the Reserve Bank of New Zealand (RBNZ) cut interest rates by 75 basis points and announced it would begin quantitative easing for the first time. And following the RBNZ decision, the New Zealand government announced an unprecedented fiscal stimulus package, totalling $12.1 billion aimed at small businesses, welfare and healthcare.

New Zealand dollar falls

Elsewhere, there was a sharp decline in the New Zealand dollar as investors bought safe-haven currencies like the US dollar and Japanese yen, and sold more ‘risky’ currencies such as the New Zealand dollar. The decline saw the kiwi trade to its lowest level in more than a decade, eventually ending the quarter down 11.6% versus the US dollar.

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.

ANZ New Zealand Investments Limited is the issuer and manager of the OneAnswer KiwiSaver Scheme, the OneAnswer Multi-Asset-Class Funds and the OneAnswer Single-Asset-Class Funds. Important information is available under terms & conditions. Download the guide and product disclosure statement.