Selected Market Indicators for Periods Ended 31 December 2022
December saw global share markets retreat from advances made in November, continuing their recent ‘see-sawing’ pattern. Fears of a recession and earnings risks remained. The US Federal Reserve (the ‘Fed’) stuck with its higher-for-longer interest rates policy and raised the US federal funds rate by 0.5% (50bps). This led to a higher terminal rate projection, and increased investors’ fears of a potential monetary policy mistake. Other central banks followed suit, with the Bank of England and European Central Bank also increasing interest rates by 0.5%. On a positive note, December also saw the release of resilient US economic and consumer confidence data, softer US Consumer Price Index (CPI) figures, and easing supply chain dynamics as China moved away from its zero-Covid policy – all of which helped to soften the overarching negative economic sentiment.
In the rising interest rate environment, the New Zealand share market ended the month with a slight decline. The high dividend-paying nature of the market provided support, however, reducing demand in the agriculture sector impacted its performance. Australian share markets also suffered losses as commodity prices continued to ease towards the end of the year. The S&P/NZX50 (New Zealand Index) fell -0.6% with the S&P/ASX 200 (Australian Index) finishing down -3.2% (in local currency).
Rising interest rates also impacted the listed property sector, which also suffered during the month. The house price indices, which measure the price changes of residential housing as a percentage change from a specific start date, and unit sales data in the developed countries continued to decline in December. Listed infrastructure such as airports and transport facilities, outperformed listed property for example commercial real estate, as inflation remained a focus for market participants.
The New Zealand Dollar strengthened 1.8% against the USD in December. With the Reserve Bank of Australia projecting to end its rate hiking cycle earlier than other developed economies, the New Zealand Dollar gained 0.6% against the AUD over the month.
Significant developments for December included:
- The Fed raised the federal funds rate for the seventh time in 2022, taking the targeted range to between 4.25% and 4.50%. Along with the increase came indications that officials expect to keep rates higher in 2023, with no reductions until 2024.
- After three years of strict Covid restrictions, China finally opened its borders for both domestic and international travelers. Chinese Government officials have also signaled their intention to pursue proactive fiscal policies to support and bolster domestic economic activity over 2023.
- New Zealand consumer and business confidence surveys conducted by ANZ fell to new lows in December, as the Reserve Bank of New Zealand’s (‘RBNZ’) hawkish forecasts and rate hikes have taken their toll. Many of ANZ’s confidence indicators are now around their 2008 GFC lows.
18 January 2023