Selected Market Indicators for Periods Ended 30 April 2022

Global equity markets had their most difficult month since March 2020 as the confluence of global central banks tightening monetary policy, economic growth momentum fading and a challenging corporate earnings outlook triggered a ‘risk-off’ response among market participants. In recent years, policy support would be ever present to ease the pain, however high inflation readings are leaving central banks little option but to maintain their course and continue tightening.

The MSCI All Country World Index returned -6.5% (in local currency) as global monetary policy, slowing economic growth and geopolitical uncertainties gave investors little reason for optimism. The MSCI Emerging Markets Index returned -3.5% (in local currencies), driven by Chinese markets as investors weighed the impact of China’s ‘zero-COVID’ policy. The commodity rally moderated somewhat in April with the Bloomberg Commodity Index (hedged NZD) returning 4.5%, however the impact of Russia supplying less oil to the market is expected to be felt increasingly in May. The NZX50 returned -1.9%, faring better than its international counterparts as a result of the defensive nature of its constituents.       

Significant developments for April included:

• Elon Musk - CEO of Tesla and SpaceX, and the world’s wealthiest man, has agreed to acquire Twitter for USD44bn. Musk has secured approximately $7bn in funding support for his Twitter acquisition bid, including from Silicon Valley moguls and the cryptocurrency exchange ‘Binance’. As a result of this financing, Musk intends to halve the amount of the loan he would otherwise have to take out against his shares of Tesla, from USD12.5bn to USD6.25bn. 
• China’s ‘zero-COVID’ policy continues to place pressure on already strained global supply chains. Shipping analytics firm ‘Windward’ has calculated that 20% of the world’s roughly 9,000 active container ships are currently idle in traffic jams with close to 30% of that backlog in China alone.
• As New Zealand mortgage interest rates have risen across the board alongside the OCR, house prices have experienced their biggest quarterly drop in a decade. Valuation company ‘QV’ reported that the average house price decreased by 0.6% over the March 2022 quarter. Market commentators expect that the housing market will continue to cool further, with Westpac economists expecting a further 15% decrease in prices before the end of 2023. Such a drop would take average house prices back to where they were at the start of 2021.