Research Team, 8 March 2019

The local NZX 50 reached an all-time high this week despite the domestic calendar being quiet. At the time of writing, the index is up a healthy 6.9% year to date, as investors seek relatively stable dividend streams as global interest rates are expected to remain lower for longer.

Dairy prices continued to climb at the latest Global Dairy Trade (GDT) auction.

The latest GDT auction took place early Wednesday morning and ended on a high, recording a seventh consecutive rise with the headline index up 3.3%. Butter saw the most dramatic move jumping 11.0%, while both whole milk powder and cheddar saw a healthy 6.0% boost. At the other end of the spectrum, the price of skim milk powder dropped 4.3% and rennet casein fell marginally, down 0.1%. Meanwhile, the Fonterra shareholders’ fund has bounced off last week’s record lows after the dairy cooperative downgraded its earnings forecast and said it won’t be paying an interim dividend. Shares of The a2 Milk Company have also been buoyant, and remain up 33.1% this year.

US markets edged lower this week amid a lack of progress on the US-China trade front.

US President Donald Trump is said to be pressuring US negotiators to cut a deal with China soon in hope of fuelling a market rally. Trade tensions have been a constant source of market volatility over the past year, as negotiations between the world’s two largest economies continue to play out.

Staying in the US, the bull market turned ten!

The current bull market had a milestone birthday this week, celebrating the tenth anniversary since the March 2009 low. Wednesday (March 6) marked the anniversary of the day the S&P 500 hit its intraday low of 666 way back in in 2009. This was the turning point for equity markets that had slumped heavily in the 18 months prior.

Despite little on the trade front, Chinese shares surged to a nine-month high.

In an annual report the Chinese Government said it would implement measures to boost domestic consumption to counter the impact of a slowing economy. Chinese Premier Li Keqiang said that the government aims for the economy to grow in a range of 6.0 to 6.5% in 2019, which is below the 2018 rate of 6.6% - its slowest pace in almost 30 years. Li said Beijing aims to keep the consumer price inflation (CPI) at around 3% in 2019, unchanged from last year's goal. China's CPI rose 2.1% from a year earlier in 2018.

Australian shares closed at a six-month high despite fourth quarter GDP figures coming in below market expectations.

The Australian economy grew by just 0.2% in the fourth quarter of 2018, below expectations of a 0.3% rise. The figures showed construction fell sharply, consumer consumption was weaker and the impact of the drought on agriculture continued to be felt. While one of the biggest contributors to economic growth was government spending. The New Zealand dollar climbed higher against the Australian dollar following the news. The Reserve Bank of Australia has kept interest rates at a record-low of 1.5% since mid- 2016 and recently flagged it is open to another cut.

The Canadian dollar weakened over the course of the week due to rate-hike uncertainty.

In the latest sign of global central bank dovishness, the Bank of Canada held interest rates steady as expected amid a slowing economy and said there was ‘increased uncertainty’ around the timing of future rate increases. That in turn, pushed the Canadian dollar to its lowest level in two months versus the greenback.

Despite the dovish stance by central banks, the Federal Reserve in the US reported the US economy continued to grow in the first weeks of 2019 despite the 35 day partial government shutdown, while noting the labour market remains tight.