Selected Market Indicators for Periods to 30 June 2023
In June, global share markets showed strength with returns largely driven by players in ‘big tech’ alongside consumer discretionary, industrials and the materials sector. In a surprising move, key central banks worldwide implemented additional rate hikes due to growing concerns about overheated labor markets. In the first quarter of 2023, Statistics New Zealand announced that New Zealand had entered into a ‘technical recession’, which was a result of the 525 basis point (bps) (5.25%) increase in rates by the Reserve Bank of New Zealand (RBNZ) since the onset of their tightening regime in October 2021. Despite this, the equity market performed well both globally and domestically, as June closed out the first half of 2023 positively.
The Reserve Bank of Australia increased its cash rate target by 25bps (0.25%) to 4.10%, noting that inflation is still too high and will remain so for some time yet. This had little effect on the ASX200 (local currency) which finished June up 1.8%. The NZX50 also posted a positive 0.9% performance for the month despite the local economy dipping into a ‘technical rescission’ by the barest of margins.
Global equity returns were decidedly positive with both value and growth stocks delivering similar results during the month, unphased by global rate hike announcements. Returns were largely driven by positive US economic surprises and a continuation of the ‘tech boom’. The MSCI World (local currency) was up 5.7% and the NASDAQ was up by 6.7%.
The US dollar weakened against most major currencies during the month, with the NZD/USD up 2.2%. Other NZD crosses showed only a small net change as NZ’s downside bias against Australia’s stronger economic outlook produced a -0.6% NZD/AUD return. The NZD/GBP briefly traded at a three-year low and returned -0.3% on the month.
Significant developments for June included:
- Statistics New Zealand reported a 0.1% decline in New Zealand's gross domestic product (GDP) over the previous quarter, pushing the country into a technical recession after Q1 2023 became the second consecutive quarter to produce negative economic growth. Following this announcement in June, many sectors slowed or contracted as the economy braced for further cyclical pressures.
- Key central banks worldwide remain hawkish as the Bank of Canada, Reserve Bank of Australia, and Bank of England all delivered further rate hikes above market expectations as the battle against inflation continues.
- The Russia-Ukraine war continues to impact geopolitics, with an apparent coup attempt in Russia ending almost as quickly as it started. This ongoing conflict remains a source of tail risk for markets as investors hold concerns over an escalation in the war once again impacting commodity markets and driving upwards pressure on inflation.
21 July 2023