Selected Market Indicators for Periods to 31 March 2023

Global share markets were positive despite the turmoil that engulfed the banking industry. Leading the advance was the NASDAQ (6.8%) which was largely attributable to the Technology sector as investors turned their attention to growth stocks as bond yields fell. To little surprise, the biggest detractor in March was the financial sector, which plummeted as a result of Silicon Valley Bank’s (SVB) closure.                                                 

As global inflation remained elevated, central banks elected to continue raising interest rates. The unexpected failure of SVB, and the confidence crisis and resulting government sanctioned takeover of Credit Suisse led to a reversal of last month's trend, with sharp declines in both local and global yields and increased market volatility.

The New Zealand market delivered a modest gain in March, with the S&P/NZX 50 index up 0.2%. In contrast, the Australian market fared slightly worse, finishing down -0.2% over the month. Despite corporate earnings reported across Australasia generally aligning with market expectations, investor confidence continues to be challenged as companies contend with rising input costs and eroding profit margins.

Global listed infrastructure ended the month up 2.4% as investors’ views turned positive. Steady cash flow, combined with easing operating costs continued to support the sector’s appeal to in the current high interest rate environment. Listed property (-3.7%) underperformed infrastructure in March, as house prices continued to decline and political instability in Europe and Asia weighed on market sentiment.

Significant developments for March included:

• Swiss investment bank UBS has agreed to acquire Credit Suisse for almost $3.25 billion in a deal that was urged by Swiss regulators to avoid further market turmoil. The acquisition comes after Credit Suisse's plan to borrow up to 50 billion francs (USD $54 billion) failed to reassure investors and customers, leading to a drastic drop in the share prices of Credit Suisse and other global banks.
• North Carolina-based First Citizens Bank acquired Silicon Valley Bank (SVB) following its collapse and bankruptcy filing in March. The government-backed deal saw First Citizens Bank take control of SVB’s $72 billion in loans at a $16.5 billion discount, as well as its $56 billion in deposits.
• The US Federal Reserve (Fed) has raised interest rates by another 0.25% (25 basis points), expressing caution about recent banking crises and suggesting that future hikes are uncertain. The Fed will closely monitor ongoing data to determine if additional policy adjustments are necessary to achieve their goal of returning annual inflation to a rate of 2%.