Selected Market Indicators for Periods to 31 July 2022

Global share markets experienced a significant rebound in July, after the June lows. Expectations of further aggressive interest rate hikes to combat inflation faded, with many market commentators noting that inflation had likely reached its peak in most major economies and would begin to ease. The US Federal Reserve (the Fed) raised US interest rates another 75 bps (0.75%), largely in line with market expectations. Positive momentum in share markets was built on better-than-expected earnings data, strong employment growth, and improved retail sales data across the Eurozone, US and Australasia. Tensions between the East and the West continued to simmer and warning signals in global growth, and the risks of recession remained high.

Global shares had their best month of the year to date as markets expect the Fed to ease their pace of interest rate hikes going forward. Google and Microsoft announced resilient corporate earnings figures for the second quarter, sparking a rally led by growth stocks. The MSCI World was up 8.0% in local currency, while the tech-heavy NASDAQ 100 increased 12.4%.

New Zealand shares also rallied in July, after hitting 18-month lows in June. The S&P/NZX 50 Index was up 5.8% buoyed by an improvement in investor confidence on the full border re-opening. The Australian share market performed similarly, returning 5.7% and managing to shrug off concerns relating to decreased demand for commodity exports in a recessionary environment.

Global Listed Infrastructure has continued to be one of the better-performing asset class in 2022 in this volatile market, aided by the defensive nature of the sector and inflationary defense. Global REIT Index was up 7.8% in July, benefitting from its positive correlation with global shares and China’s announcement of a USD44 billion real estate fund to resolve its debt crisis and restore confidence in the industry.

Significant developments for July included:

• The US experienced its second consecutive quarter of negative GDP growth – the traditional signifier of an economic recession. The decrease of -0.9% in GDP growth over the second quarter of 2022 was driven by a decline in government spending, investment and inventories amid recessionary concerns. Driven by slowing growth in the US, China and the Eurozone, the International Monetary Fund revised its global growth outlook to 3.2% in 2022 and 2.9% in 2023, a downgrade of -0.4% and -0.7% respectively.
• European energy ministers had agreed on a deal to cut gas consumption by 15% in order to limit its dependency on Russian gas supplies. The agreement means a mandatory reduction in energy consumption for EU countries during periods of shortage, and may add upwards pressure to energy prices.
• Chinese banks face mortgage losses of up to USD350 billion. Confidence in the domestic property market has plummeted, leaving a large number of real estate projects to stall and triggering a boycott of mortgage repayments across more than 90 cities in the country.
• Confidence data continued to remain near record lows with marginal improvements. The July ANZ Consumer and Business Survey reported confidences are at recessionary levels with lower investment and profit expectations month on month.