Research Team, 14 December 2018

Market volatility continued to feature this week, with global share markets registering big swings in either direction. Investors are grappling with a range of worries including flaring geopolitical tensions and slowing global growth.

The local NZX 50 has held up relatively well when compared to markets offshore. At the time of writing, the local benchmark is up 4.1% for the year, but remains 6.9% below its 52 week high reached on September 24. In Australia, the ASX 200 slumped to a two-year low at the start of the week but managed to bounce off its lows as the week progressed. The Australian benchmark is off 6.5% for the year, while China’s Shanghai Composite has tumbled 21.3%.

After a tough start to the week, US stocks rose Wednesday, as the outlook for trade took a positive turn. Trump tweeted "Very productive conversations going on with China! Watch for some important announcements!” Reports have suggested China has agreed to cut tariffs on imported American cars to 15% from 40%, potentially a sign of a cooling trade war. Investors, however, remain cautious about a broader deal.

Markets also reacted positively to news that Canada granted bail to detained Huawei Chief Financial Officer, Meng Wanzhou, who was apprehended last week. The decision by the court in Vancouver came as Donald Trump said he would intervene in the case if it would serve national security interests or help close a trade deal with China.

It also follows news that the former Canadian diplomat Michael Kovrig has been detained in China. Kovrig had previously served as political lead for Prime Minister Justin Trudeau’s 2016 visit to Hong Kong. Trudeau told reporters the Government took news of the detention very seriously.

This week saw Prime Minister Theresa May survive a confidence vote from her Conservative Party, however, more than a third of lawmakers said she is no longer the right leader to implement Britain’s exit from the European Union. May is said to have told her party, she won’t run in the next election. The British pound rallied from a 20-month low after the vote.

Back home, shares of Trade Me rose to an all-time high after receiving a formal takeover offer from Apax Partners to acquire 100% of its shares for $6.45 per share (a 5 cent increase on its original bid). The deal, which is subject to shareholder and court approval, has been unanimously supported by TME’s board. A key condition of the takeover is that the scheme of arrangement is approved by shareholders at a meeting scheduled for April. CEO Jon MacDonald said he will continue with the company beyond 2018 to ensure continued momentum, after initially planning to step down in December.

Restaurant Brands announced it is bringing the Taco Bell brand to both New Zealand and New South Wales in Australia, commencing in 2019. Resuatrant Brands plans to open more than 60 new restaurants between 1 January 2019 and 30 June 2024.

Across the ditch, Syndey’s property slump has reached a new milestone, with values now fallen further than the late 1980’s when Australia was on the cusp of entering its last recession. Average Sydney homes have fallen 10.1% since their 2017 peak. That surpasses the top-to-bottom decline of 9.6% recorded between 1989 and 1991. The decline in Sydney house prices accelerating as tighter mortgage lending standards by the banks limit the amount people can borrow and as nervous buyers sit on the sidelines. Sydney property prices are still more than 60% higher than they were in 2012.