Mark Lister, 3 May 2021

The markets were mixed last week, with the US flat, the UK up and Europe down slightly. Australian shares fell, while the local NZX 50 outperformed most offshore peers with a 0.6% gain. Domestic interest rates were little moved, while the yield on a 10-year US Treasury increased from 1.56% to 1.62%.

April was a strong month for most equity markets, with the S&P 500 rising 5.2%. The US index hit new highs throughout the month and posted the strongest monthly gain since November. Year to date, US shares are up an impressive 11.3%, led by the energy (+29.9%), financials (+22.7%) and real estate (+17.2%) sectors.

European and Australian shares also rose strongly last month, adding 3.8% and 3.5% respectively. Europe hit fresh highs and the ASX 200 in Australia rose to within 1% of its all-time peak from February 2020. The local NZX 50 gained a more modest 1.4% for the month, and it remains down almost 3% in 2021.

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Turning to the week ahead, some important economic releases loom in the US with the latest ISM manufacturing survey out tonight and the monthly jobs report due on Friday. The international reporting season continues, with results from the likes of Pfizer, CVS Health, General Motors, Paypal, Beyond Meat, Zoetis and Adidas.

It will be a holiday-shortened week in the UK, with markets closed on Monday. Thursday’s Bank of England meeting will be the key event, with economists expecting an upgrade to the economic outlook and potentially signals that the Bank will soon begin tapering its asset purchases.

It's also a busy week in this part of the world. Across the Tasman, there is an RBA meeting to monitor, as well as the central bank’s Statement of Monetary Policy on Friday, which will include new forecasts. There are also a handful of results including those from three of the four major trading banks, and Macquarie Group.

Back home, the latest global dairy trade (GDT) auction results are out early Wednesday morning. Prices were steady at the last auction, with the headline GDT index falling a marginal 0.1% and whole milk powder up just 0.4%. Prices are 3.6% below the seven-year high that was reached in early March, although the GDT index remains up 26.8% in 2021 and 44.1% higher than it was a year ago.

The highlight of the domestic economic calendar this week will be Wednesday’s release of the latest labour force report, which will cover the March 2021 quarter. Expectations are for the headline unemployment rate to rise slightly to 5.1%, compared with 4.9% in the previous three months. With the labour market having stabilised, we might learn more from the detail in the report. While the headline unemployment rate is encouragingly low, we will be watching for any change in the underutilisation rate.

The Reserve Bank of New Zealand (RBNZ) releases its Financial Stability Report (FSR) twice a year, and the latest edition is due at 9.00am on Wednesday, with a press conference from RBNZ Governor Adrian Orr to follow at 11:00am. Six months ago, the FSR painted an improving picture of the economy, while noting there was still considerable uncertainty about the outlook. Plenty has happened since November, almost all of which has been good news, so we should be in for a more positive message this time around.

With so much focus on rising inflationary pressures and what they might mean for central bank policy, the latest RBNZ survey of expectations will be of interest this week. Due for release on Friday at 3:00pm, we know that the RBNZ pays a lot of attention to changes in inflationary expectations, as it should.