Key Market Movements for Q4 -2024

Key market movements for the quarter

Global shares delivered mixed performance in Q4, with gains in the US and Japan driving market advances, while Europe experienced weakness. US shares rose following Donald Trump’s presidential win, though fears of trade protectionism weighed on other regions. Emerging markets, led by Chinese weakness, declined overall but provided a +4.6% return for unhedged NZ investors due to a weaker NZ dollar. Bond markets were volatile, with longer-term yields rising despite rate cuts by central banks. Concerns over potential US tariffs fueling inflation led to losses in US Treasury bonds, while a stronger US dollar boosted returns for NZ investors holding unhedged foreign assets.

International Shares

Developed markets were muted, impacted by Middle East tensions, Ukraine, and US political uncertainty. The US market gained over +5% early in the quarter but pared back gains after fewer rate cuts were forecast for 2025.

Eurozone markets fell (-2.8%) amid political instability in Germany and France, while Japan's Nikkei 225 rose +5% on strong economic growth and easing inflation. The NZ dollar's -13.5% decline against the US dollar boosted unhedged returns.

Emerging Markets Shares

Emerging markets fell (-4.2%) in local terms but returned +4.6% for unhedged NZ investors. Weakness stemmed from China’s slow economy and Trump’s protectionist policies. While smaller markets like Taiwan performed well, declines in China, India, Brazil, and Korea dragged down the index.

New Zealand Shares

The S&P/NZX 50 Index posted a +12.2% annual return, supported by strong Q4 gains. Inflation eased, and the Reserve Bank cut the OCR from 5.25% to 4.25%. Auckland Airport (+16.5%), Contact Energy (+16.3%), and Fisher & Paykel Healthcare (+11.0%) led gains, while Mercury NZ fell (-9.3%).

Australian Shares

The S&P/ASX 200 fell (-0.8%) in Q4 as weak commodity prices hurt the materials sector. However, the financials sector, led by NAB (+1.6%), Westpac (+4.3%), and Commonwealth Bank (+13.2%), offset some losses. The Australian dollar’s slight strength boosted NZ investor returns.

International Fixed Interest

Global fixed interest markets saw rising yields. US 10-year Treasury yields climbed from 3.79% to 4.57%. The FTSE World Government Bond Index (hedged to NZD) returned 0.0%, while the Bloomberg Global Aggregate Bond Index fell -1.2%.

New Zealand Fixed Interest

The RBNZ cut the OCR twice, bringing it to 4.25% as inflation slowed and the economy softened. The S&P/NZX A-Grade Corporate Bond Index gained +1.1% in Q4, while NZ 10-year bond yields rose from 4.28% to 4.61%.