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Market review

A summary of how financial markets performed in the quarter ending December 2019.

Global markets

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 market

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.

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