Here's a summary of global share markets for the three months ending 31 December 2022

Global Shares

Global share markets made good gains in local currency terms in the December quarter but fell in unhedged New Zealand dollar (NZD) terms, with the MSCI ACWI Index - Net returning -1.8%. Much of the gains were driven by expectations the world's major central banks would soon pivot to smaller rate hikes amid increasing evidence inflation may have peaked. The US Federal Reserve, the European Central Bank and the Bank of England all raised their benchmark rates by smaller (0.50%) increments in December; though the banks did warn that further rate hikes were needed to tame inflation. Stocks also benefited from a series of mostly encouraging US and European earnings updates and Beijing's decision to begin relaxing its strict COVID-19-related restrictions despite an alarming number of new cases sweeping the country. Limiting the advance were renewed recession fears, ongoing geopolitical risks and the Bank of Japan's surprise decision to widen the band it allows the country's 10-year government bond yield to trade within; the move effectively setting the stage for a shift away from the Bank's current, ultra-easy monetary policy.

At the country level, both the benchmark US S&P 500 Index (7.1%) and the Dow Jones Industrial Average (15.4%) performed well over the period, while the tech-heavy NASDAQ (-1.0%) fell, albeit modestly. Stocks were also higher in Europe (14.3%1), the UK (8.1%2), Japan (3.0%3) and China (1.8%4).

New Zealand shares

The New Zealand share market made good gains in the fourth quarter, returning 3.8%5 . Stocks benefited in part from news the local economy expanded 2.0% in the three months to 30 September. The outcome, which follows the upwardly revised 1.9% expansion we saw in the second quarter, easily beat market expectations of 0.9% growth. Stocks also benefited from a modest easing in the latest inflation figures and a positive lead from major overseas markets. Limiting the advance were a further two rate hikes from the Reserve Bank of New Zealand (RBNZ), which took the official cash rate to 4.25%; its highest level since January 2009. The RBNZ raised interest rates a total of seven times throughout 2022 – a cumulative increase of 3.50%. At the sector level, consumer staples was the best performer, followed by communication services and healthcare. Financials and industrials also performed well, while consumer discretionary recorded a sizable decline.

Australian shares

Australian shares performed well over the period, returning 9.1%6. Contributing to the gains was the Reserve Bank of Australia's decision to reduce the size of its interest rate hikes despite uncomfortably high inflation; the Bank raising the official cash rate just 0.25% at its early October meeting and again by the same increment in November and December. Stocks also benefited from strong gains across the major banks and miners, which together comprise a large part of the market.

Global listed property

Global listed property was positive for the quarter, gaining 4.0%7 in hedged NZD terms. Similar to the broader global equity market, listed property stocks benefited from smaller interest rate hikes across the major central banks. North America was the best performer, followed by Australia and Continental Europe. The UK and Asia Pacific ex Japan also performed well, while Japan recorded a modest decline. In terms of sectors, US malls and shopping centres posted the biggest gains.

Global listed infrastructure

The global listed infrastructure market was also stronger, returning 7.1%8 in hedged NZD terms. Listed infrastructure stocks benefited largely from a pivot to smaller interest rate hikes in the US, Europe and the UK. Emerging markets, North America and the UK posted the biggest gains, while Asia Pacific ex Japan and Continental Europe recorded more modest, albeit positive, returns. At the sector level, water utilities, gas utilities and energy were amongst the best performers over the period.

Figure 1. Global Equities

Global fixed income

Global bonds made modest gains in the fourth quarter, returning 0.8%9 in hedged NZD terms. Longer-term government bond yields rose (prices fell) as central banks continued to raise interest rates in the face of high inflation. Credit markets were stronger for the quarter, with spreads on US and European high-yield and investment-grade debt narrowing amid the general 'risk on' tone that permeated financial markets throughout much of the period. Emerging markets debt also performed well.

Figure 02: Global Fixed Interest


New Zealand fixed income

The New Zealand bond market edged slightly higher over the period, returning 0.1%10 . Domestic long-term government bond yields rose (prices fell) as the RBNZ continued to raise interest rates in response to still-high inflation. Bonds were also impacted by further rate hikes globally. The yield on New Zealand 10-year government bonds closed the quarter 17 basis points higher at 4.47%. Meanwhile, local credit markets were positive, with spreads narrowing over the period.

Figure 03: New Zealand Equities

New Zealand dollar

The New Zealand Trade-Weighted Index11 rose 5.8% over the quarter, driven in part by multiple domestic rate hikes, good gains across the broader commodities complex and general US dollar (USD) weakness. Limiting the currency's advance was tighter monetary policy globally. The NZD rose 10.5% against the USD, 6.4% against the Australian dollar, 2.3% against the British pound, 1.2% against the Japanese yen and 1.8% against the euro.

Figure 04: New Zealand Fixed Interest

NZ Data Table for Q4 2022

^ Russell Global Large Cap Index until 30 September 2018, MSCI ACWI Index - Net thereafter
All returns in local currencies unless otherwise stated

1. Dow Jones EuroStoxx 50 Price Index
2. FTSE 100 Index
3. Tokyo Stock Exchange Tokyo Price Index (TOPIX)
4. Shanghai Shenzhen CSI 300 Index
5. S&P/NZX 50 Index with imputation credits
6. S&P/ASX 300 Accumulation Index
7. FTSE EPRA/NAREIT Developed Real Estate Index Net NZD Hedged
8. S&P Global Infrastructure Index (NZD hedged)
9. Bloomberg Global Aggregate Index – $NZ Hedged
10. Bloomberg NZ Bond Composite 0+ Yr Index
11. The trade-weighted index for the NZD is an indicator of movements in the average value of the NZD against the currencies of our major trading partners.