Selected Market Indicators for Periods Ended 31 October 2022

October was a positive month for investors, as we saw share markets recovering. Momentum in share markets was built on generally positive growth in Q3 US corporate earnings reported during the month. The S&P 500 gained 8.1% (in local currency) in October, with notable gains in the Industrial and Energy sectors. However, investor focus quickly shifted back to recessionary fears at the end of the month due to US President Joe Biden’s call for a windfall tax on Oil companies, US annual inflation coming in at 8.2% and remaining near its 40-year highs, as well as worsening consumer confidence data. Central banks in other developed economies, such as the European Central Bank and Bank of Canada, continued to raise interest rates and signal further hikes to come. The Reserve Bank of Australia (‘RBA’) and Bank of Japan both remained optimistic about controlling inflation. However, sentiment about the global economic outlook remains pessimistic, with persistent multi-decade high inflation becoming a virulent issue around the world.

New Zealand share market finished up 2.5% in October, with logistics giant Mainfreight continuing to lead the domestic market. New Zealand’s underperformance relative to its global counterparts was due to the release of an unexpectedly high CPI reading and low business confidence data.

The Australian market outperformed in October, with ASX200 ended up 6.0% (in local currency) due to high commodity prices, positive retail sales, and RBA’s “dovish” interest rate hike of 25bps in October as opposed to the 75bps increase expected by the market.

Listed Property had a relatively strong month, up 3.0% and benefitting from its correlation to global equity markets. With the US now focus on green energy projects, investors’ growing need in inflation protection and long-term cash flow stability, Listed Infrastructure saw market support and returned 3.1% over the month.                                                                              

Significant developments for October included:

• In the US, the Biden administration announced plans to significantly tighten their control on microchip exports. The controls imposed effectively ban Chinese companies from buying advanced chips and chip-making equipment without a license. After the announcement, China’s chip stocks plummeted, shedding USD8.6 billion in market value within a day.
• The UK Government proceeded with its bond buy-back scheme in order to stabilize bond markets, in the wake of a number of UK Pension Funds facing margin calls as the value of their UK Gilts (used as collateral) plummeted. Former UK Prime Minister Liz Truss resigned over the financial turmoil after 44 days in office, and the BoE is set to begin their quantitative tightening programme in November.
• The NZ Q3 2022 annual core CPI figure came in above expectation at 7.2% for the year to 30 September 2022. Consumer confidence data from the ANZ-Roy Morgan survey remained at a decade low, with business inflation expectation now sitting higher than consumer expectations.