Mark Lister, 28 September 2020

It was another mixed week for global sharemarkets. The S&P 500 in the US slipped 0.6%, its fourth consecutive weekly decline, which sees the index 7.3% below its early September high. UK and European shares fell harder still, declining 2.7% and 3.6% respectively. The NZX 50 was a much better performer, rising 1.4% for the week. The top performers in the NZX 50 last week were Pushpay (+8.9%), Freightways (+6.1%) and Fisher & Paykel Healthcare (+4.7%), while Sky TV (-7.6%), Chorus (-5.9%) and Serko (-4.6%) lagged.

The ASX 200 in Australia had its best week in six, rallying 1.7% on the back of a strong rebound from the banks. The sector was boosted by a surprise move from the Government to relax responsible lending laws. This should assist credit growth and remove one of the headwinds the sector had been facing.

The NZ dollar fell sharply against a resurgent US dollar last week, with the currency down 3.2% to the lowest levels in more than a month. This has offset the impact of weaker US equities, and it will have pleased exporters as well as the Reserve Bank. The highlight of the coming week could well be the first debate between President Donald Trump and Democratic nominee Joe Biden. The 90-minute debate will be held in Cleveland, Ohio on Tuesday night at 9:00pm US Eastern time (which is 2:00pm on Wednesday here in NZ).

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Ohio is a battleground state, which Trump won in 2016 with 52% of the vote compared to 44% for Hillary Clinton. Polls suggest he has a slim lead over Biden this time around, and with early voting having begun in Ohio, both candidates will be keen to impress. After Trump’s nomination of Amy Coney Barrett for the Supreme Court, this debate will be even more tense than it would’ve otherwise been.

Other notable events on the global calendar are the September ISM manufacturing index and the monthly jobs report in the US. ISM index and jobs report in the US. Highlights of the economic week in the US will include the ISM manufacturing index on Thursday and the jobs report on Friday, both of which will cover the month of September. The ISM and the jobs report were both better than expected last month. The ISM manufacturing index rose to 56.0, up from 54.2 in July and the highest since November 2018. The new orders component was stronger still, increasing to 67.6 from 61.5 a month earlier, the highest since January 2004. The August jobs report was also stronger than expected, with almost 1.4m new jobs added for the month. The unemployment rate fell to 8.4%, down from 10.2% and well below the 9.8% that was forecast, while the underemployment rate fell to 14.2% (from 16.5% in July).

China PMIs for September will also be of note. We will get a fresh update on the Chinese economy this week, with the Official PMI and the Caixin manufacturing PMI both due for release. These will be out at 2:00pm and 2:45pm on Wednesday respectively, and both will cover the month of September. Both measures pointed to ongoing economic momentum in August. The Official Composite PMI increased from 54.1 in July to 54.5 last month, the highest since May 2018 (with the services sector driving much of this strength). The Caixin Composite PMI for the same period also strengthened, rising from 54.5 in July to 55.1 in August.

On the domestic front, the ANZ Business Outlook survey for September is due. The September ANZ Business Outlook survey is due for release on Wednesday at 1:00pm. The preliminary release was encouraging, with overall confidence improving from -41.8 to -26.0 and the Own Activity index rising from -17.5 to -9.9. These were the strongest headline business confidence figures we've seen since February, before the first lockdown, and it suggests most businesses see light at the end of the tunnel. We will be watching these measures closely over the coming months, as the true test of firms’ resilience could come now that wage subsidy support has ended.