Mark Lister, 8 June 2020

Global equity markets rallied strongly last week, with optimism over the ongoing reopening of many economies capped off by a much better than expected US jobs report on Friday. The S&P 500 was up 4.9% for the week, taking the rebound from the March lows to a stunning 42.8% and putting the index just 5.7% below its all-time high from February. The tech-heavy Nasdaq index in the US posted a new intraday record high on Friday and is now up 9.4% year to date.

Shares in the UK and Europe were also strong last week, rising 6.7% and 7.1% in the wake of increasing stimulus from the European Central Bank. Meanwhile, the ASX 200 in Australia and the domestic NZX 50 posted gains of 4.2% and 2.7%. The NZX 50 is now 7.5% below the record high from February. The top NZX 50 movers were Tourism Holdings (+33.5%), NZ Refining (+27.1%) and Vista (+23.3%). The laggards were Pushpay (-7.8%), Fisher & Paykel Healthcare (-6.3%) and Skellerup (-1.0%).

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The NZ dollar continued to rise on the back of this positive sentiment. The local currency was up 4.9% against a soft US dollar to more than US$0.65, the highest it has been since January. Safe haven assets were out of favour against the backdrop of positive risk sentiment. Gold fell 2.5% for its third consecutive weekly decline, while the yield on a 10-year US Treasury bond rose from 0.65% to 0.90%, the highest since mid-March.

Investors will continue to focus on the gradual reopening of economies this week, with many of parts of Europe set to ease restrictions. New York City will also begin lifting lockdowns, having recorded its first day of no virus fatalities since March. A highlight of the global calendar will be the Federal Reserve meeting, with the outcome due early Thursday morning in New Zealand.

Domestically, we will be watching the preliminary release of the ANZ Business Outlook survey and also the ANZ truckometer, both due Tuesday. The May housing market report from the Real Estate Institute will also be of interest for local investors. The April report reflected the lockdowns that stopped the property market in its tracks, with the number of properties sold nationwide decreasing 78.5% compared to the same month in 2019. This was an unsurprising outcome given during the first 27 days of the month sales could only take place by contactless methods. The next few months should give us a much better picture of the impact recent events are having on the housing market, and the May figures will provide one of the first indications of how buyer sentiment, prices and volumes have been impacted by the outbreak.

Fed decision a highlight on the global calendar. The Federal Reserve meets on Tuesday and Wednesday in the US, with a statement and other meeting materials scheduled for release at 6:00am NZ time on Thursday. This meeting should include an updated summary of economic projections, and Chair Jerome Powell will hold a press conference shortly after. The central bank isn't likely to signal a major change of course this week, with interest rates already just above zero and with guidance somewhat vague when it comes to future asset purchases. Yield curve control could be one of the topics that is discussed, although it is unlikely the Fed has made any firm decisions on this. Other topics that Powell might touch on include the economic outlook and the strong jobs report, progress on reopening the economy, and strong equity market performances we have seen in recent weeks.