Investors eye local recovery
Key market movements
- Global equities were positive again in October, with the MSCI ACWI up 3.7% in unhedged NZD terms and 2.7% NZD-hedged. Easing trade tensions between the US and China and a solid third quarter earnings season supported gains.
- New Zealand equities advanced 1.9%, buoyed by easing monetary conditions and early signs of an economic recovery. Australian shares delivered a smaller gain of 0.4%, with their unemployment rate climbing to a 4-year high.
- Bond markets posted modest gains over the month. The Bloomberg NZ Bond Composite Index rose 0.8%, while the Bloomberg Global Aggregate Bond Index (NZD-hedged) added 0.7%, supported by easing yields offsetting a slight widening in credit spreads.
Key developments
October’s market backdrop was shaped by central bank caution and thawing geopolitical tensions. The US Federal Reserve delivered a second consecutive 25bp rate cut, but Chair Powell signalled that further easing is “far from” guaranteed. Labour market data remains mixed, with Challenger reporting the highest monthly job cuts in 22 years, while ADP showed modest gains. The US government shutdown has delayed key data releases, creating uncertainty. Meanwhile, Presidents Xi and Trump’s meeting in South Korea led to a 12-month suspension of trade restrictions, supporting risk sentiment.The domestic economy showed early signs of recovery in October. The unemployment rate rose to 5.3%, likely marking the peak in labour market weakness. Hours worked increased for the first time in over a year, and business confidence reached its highest level since February. Lending growth at BNZ and Westpac suggests improving credit conditions. Market pricing now anticipates an OCR low near 2%, with the RBNZ expected to maintain accommodative settings well into 2026. While household cashflow challenges persist, green shoots are emerging in retail and construction.
Sentiment across the New Zealand equity market improved, supported by AGM season updates and signs of a cyclical recovery. Companies like Fletcher Building, Auckland Airport and Vulcan Steel saw increased investor interest, reflecting confidence in interest-rate sensitive sectors. Freightways reported strong quarterly results, with revenue up 8.6% and net profit rising 22.5%, reinforcing operational resilience. Ryman Healthcare and other cyclical names also benefited from stabilising demand. The recovery remains uneven but easing monetary conditions and strong export incomes are beginning to influence expectations.
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