Market Update
Correction: In our November 2024 e-newsletter, a summary of this market update incorrectly stated that the Reserve Bank of New Zealand (RBNZ) cut rates to 2.2%. This was a typographical error. The RBNZ actually lowered rates to 4.75%. We apologise for any confusion.
Global stock markets closed the month slightly lower after a last-day sell-off, finishing the month down -1.9% in local currency terms. However, the strong USD offset this decline, which meant that the Global stock market rose 4.9% in NZD terms. Likewise, the US S&P 500 (which only includes US stocks) increased 5.2% in NZD. Bond prices declined significantly with rising interest rates; the US 10-year treasury rose by 0.50% to 4.28% - its highest since July.
Robust job and inflation figures in the US prompted the market to reassess the scale and speed of the Federal Reserve's rate reductions. This resulted in a scaled-back projection for next year's easing.
Markets have been closely monitoring the election, with interest rates moving in correlation to Trump's chances under the assumption that his planned tax cuts would be positive for corporate America but that his tariff and immigration policies would increase inflation.
Australia's economic metrics reflect a relatively robust job market, alongside a decline in inflation to 2.1% from 2.7%. Despite this positive trend, the RBA remains cautious and is not expected to ease monetary policy this year.
The Reserve Bank of New Zealand lowered rates by -0.50%, which was widely anticipated by the market. Inflation decreased from 3.3% to 2.2%, returning to within the RBNZ's target range. The New Zealand economy is expected to encounter further challenges in the upcoming months, and markets anticipate another rate cut of at least 0.50% by the RBNZ this month.
New Zealand's interest rates rose less sharply than global rates, influenced by the state of the domestic economy and anticipated RBNZ easing. The 2-year rate went up by only 0.06%, while the 5-year rate climbed by 0.21%.
The USD rose throughout the month due to higher US interest rates and, coupled with weaker sentiment in New Zealand, this led to a -5.8% decline in the NZD, wiping out the gains from the previous month.
This month features several significant events, notably the US election as a key risk factor. Additionally, there will be a US Federal Reserve meeting, NZ employment data release, and an RBNZ announcement.