INSIGHTS

MARKET SUMMARY: 11 TO 15 DECEMBER

Libby Sharp, 15 December 2017

The Santa Rally appears to have arrived this week, with most markets rising. December is traditionally the best month of the year for markets with the S&P500 averaging a gain of 1.62% in December and showing a positive result 75% of the time. However, 2017 has already been an exceptional year for markets. The NZX50 has had eleven consecutive months of gains and for the year to date, has climbed more than 20%. Could this December buck the trend and see a negative result, or will the NZX50 continue to climb higher?

The US Federal Reserve raised the Fed Funds rate to between 1.25% and 1.00%. This was the third rate hike for the year. Chair Janet Yellen reiterated the path for interest rates for the next couple of years, with the Fed expected to raise rates three times in 2018 and again in 2019. However, this is the second to last meeting with Yellen as Chair with Jerome Powell set to takeover in February. Although Powell is viewed as being sympathetic to the current path, analysts will be looking to February’s forecasts for more information.

Also in the US, the results from the Alabama Senate race has seen Democrat Doug Jones take the seat. The vote was close, however, Republican candidate Roy Moore was pipped at the post after a controversial campaign. The Alabama seat is a traditional safe haven for Republicans and the vote is seen as setback to President Donald Trump.

Ryman Healthcare announced that it has purchased a site in Karori Wellington as the site for a new retirement Village. It purchased the site from Victoria University for an undisclosed sum, however has an estimated worth of $20 million.

Westfield Australia has agreed to a takeover bid from European rival Unibail-Rodamco for A$32.7 billion. The purchase will add to the already impressive portfolio, creating a global property giant with 104 malls in 27 retail markets. The market reaction was very positive, with the Westfield share price rising more than 13%.

EBOS Group announced that long time CEO Patrick Davis would be stepping down from the position in March next year, surprising the market. However, Chairman Mark Waller has said that the company had been working on a succession plan, and current CFO John Cullity will take over.

This seemed to start a trend with fellow NZX50 components, Metro Performance Glass and a2 Milk both announcing that their respective CEO’s were stepping down. Metro Performance Glass’ CEO and Executive Director Nigel Rigby will step down, as at 31 March, however the board has not named a successor. Geoff Babidge from a2 Milk will retire in 2018 to be replaced by former CEO of Jetstar, Jayne Hrdlicka.

The housing market continued to stabilise in November, from the look of the latest Real Estate Institute numbers. The house price index (HPI), a more reliable indicator of market trends, was down marginally (-0.3%) in November for Auckland, while the annual change is sitting at 0.3%. Outside of Auckland, the HPI was up 0.8% for the month and has risen 6.7% for the last 12 months. National sales volumes (after seasonal adjustments) were up 4.5% compared to last month, although remain 9.2% lower than this time last year. All regions, except the West Coast, saw sales volume increase in comparison to October.

Two key local economic releases in the week ahead include the latest ANZ Business Outlook survey, as well as the latest monthly migration numbers. After the collapse in confidence last month, it will be interesting to see if businesses have found any holiday spirit as we head into the final days of the year.

The latest migration figures will also be important, especially given the political focus on immigration. Last month, monthly net migration increased slightly but remained well below the peak. On an annual basis, net migration slowed to 70,410, the lowest since December 2016 but still significantly above the 20-year average of 18,500. Despite a rebound in October, the overall migration trend has been down. The three-month moving average has been falling since the peak in late 2016, and is at the lowest levels in more than two years.