Research Team, 3 March 2017

Some nervousness crept into markets early this week ahead of Donald Trump’s speech to Congress while the local market continued to focus on reporting season. This week also marked the end to February, which proved to be a positive month for markets on the whole. In addition to this, NZ migration data for January was released this week and saw yet another record, while house prices continued to rise according to the QV house survey.

For February, the S&P/NZX 50 gained 1.66%, backing up a strong January. For the month, Air New Zealand was the top performer rising 12.62%, followed by the two dual listed Australian banks, Westpac and ANZ, up 11.30% and 10.39% respectively. Metro Performance Glass was the weakest performer for the month, falling 22.70% after a downgrade to full year guidance, while Sky TV fell 18.10%. In Australia the S&P/ASX 200 managed to eke out a gain of 1.62% for the month, more than reversing the losses from January.

All three US benchmarks finished February for a fourth straight month of gains with the Dow Jones Industrial average advancing 4.8%, the S&P 500 rising 3.7%, and the Nasdaq 3.8% higher. The Dow Jones was once again a headline grabber setting record highs for twelve consecutive days. This was equally long to the record set in January 1987. In Europe the Stoxx Europe 600 benchmark managed a 2.8% monthly gain in February, its third monthly gain in four months. In the UK the benchmark FTSE 100 finished 2.3% higher for the month.

The local reporting season continued this week although at a much slower pace than last week. Metlifecare reported a sharply higher first half profit and dividend as well as giving a positive outlook. The share price rose to its highest level in four months. The company benefitted from the property boom, which led to a step jump in property prices.

Genesis Energy reported a 4.2% increase in first half profit and raised its earnings guidance for the full year from the October update, however this was still lower than the guidance given at the end of 2016. The company’s share price has slipped slightly in opening trade.

The long awaited Trump address had a familiar ‘America first’ theme throughout and plenty of echoes of his inaugural address. However, the disappointment market wise has been the lack of detail, but there did seem to be a big effort to sound presidential. In terms of what we did get, the President returned again to the subject of rebuilding infrastructure, and reconfirmed that he intends to repeal and replace Obamacare, increase defence spending, enforce immigration laws and also overhaul tax including cuts for the middle class.

New Zealand’s record run for migration continued, with January setting yet another annual record with net migration rising to 71,305. This was higher than the previous record set in December. Both long-term and short-term migration increased with a particular in crease in short term visitors in January due to the Chinese New Year. The majority of those visiting were bound for Auckland, with 44% heading there. The next most popular destination was Canterbury.

RBNZ Governor Graeme Wheeler stuck to the neutral guidance as domestic risks continue to be overshadowed by global risks. The governor emphasised that the potential shifts in US trade policy and rise in protectionism are a large risk to the New Zealand economy.  The rhetoric was largely unchanged from previous statement and the market continues to see the central bank holding for the remainder of the year, barring a substantial change.