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Market review

A summary of how financial markets performed in the second quarter of 2021:

International share markets were the notable performers this quarter, thanks to some strong company earnings and an easing of inflationary concerns.

Global markets

International share markets had a particularly strong quarter. Markets have also benefited as the global vaccination rollout continued at pace, meaning an easing of COVID-19 restrictions in many countries and a resulting pick-up in global growth.

This saw some of the major share market indices in the US hit all-time record highs. The S&P 500 Index delivered its fifth consecutive quarterly gain, while in Europe the Euro Stoxx 50 Index rose to its highest level since the Global Financial Crisis. Australian shares also advanced, benefiting from strength in those companies which are geared to the rebound in growth.

Bond markets recover as inflationary concerns subside

Global bond markets fared better this quarter, shrugging aside inflationary concerns to deliver modest gains. Despite evidence of pricing pressures in key economies (which ordinarily would have sent bond yields higher), yields fell across most major bond markets.

This largely resulted from some central banks (such as the US Federal Reserve and the European Central Bank) reiterating their view that the current inflationary pressures are only transitory. It also suggests that the market had already moved to factor in higher-than-expected price increases. 

COVID-19 cases ease in Europe and the US, but surge in developing countries

The COVID-19 situation improved markedly in Europe and the US, as swift vaccine rollouts saw the number of cases decline. By the end of the quarter, both regions had vaccinated more than half of their populations, resulting in an easing in lockdown restrictions and a pick-up in economic activity.

However, the situation in developing nations, notably India, worsened as a new more contagious variant was identified. At one point, India saw daily COVID-19 cases surpass 400,000 and daily deaths near 5,000.

New Zealand market

Despite delivering modest gains, New Zealand shares continued their recent underperformance relative to their international counterparts.

Market progress was ultimately held back by the weaker performance of interest rate-sensitive companies, which feature heavily in the local market; as investors continue to come around to the view that the Reserve Bank of New Zealand (RBNZ) may be one of the few central banks to begin raising interest rates.

Some company-specific news also contributed to the market’s underperformance. a2 Milk Company saw its shares fall by over 25%, as the speciality milk marketer cut its profit forecast for a fourth time.

An improvement in economic data

It was a better quarter for the New Zealand economy, as some key data pointed to a strong rebound in growth. Gross Domestic Product (GDP) data showed that the economy grew by 1.6% in the first quarter of 2021, taking year-on-year growth to 2.4%. Elsewhere, retail sales rose by 2.5% over the same period, driven by strong demand for consumer goods and building materials.

Interest rates unchanged

While the RBNZ left the Official Cash Rate (OCR) unchanged at a record low of 0.25%, it reintroduced its forward forecasts, which appeared to show that it expects interest rates to begin to rise towards the end of 2022. For now, however, its view is that “ongoing virus-related restrictions in global activity and an uneven path of economic growth still warrant a cautious approach to policy”.

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 material is for information purposes only. We recommend seeking financial advice about your situation and goals before getting a financial product. To talk to one of our team at ANZ, please call 0800 736 034, or for more information about ANZ’s financial advice service or to view our financial advice provider disclosure statement see

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 ANZ KiwiSaver Scheme, the ANZ Default KiwiSaver Scheme, the OneAnswer KiwiSaver Scheme, the ANZ Investment Funds, the OneAnswer  Multi-Asset-Class Funds and the OneAnswer Single-Asset-Class Funds.

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