InvestNow News – 12th June – Harbour – Beating expectations
Jun 9, 2020
Key points
- Equities continued to bounce back with the S&P/NZX 50 returning 3.3%, S&P/ASX 200 (in AUD) up 4.4% and the MSCI ACWI Index up 4.1%.
- Government bond yields settled in a low range, as the Reserve Bank’s bond buying (QE) programme offset the pressure that would otherwise have come from increased issuance.
- Australian and New Zealand earnings season so far, on balance, has delivered more upside than downside surprises relative to expectations.
- Budget 2020 in New Zealand overwhelmed on spending but underwhelmed on detail.
Key developments
Equity markets continued to rally with investors looking towards the re-opening of economies, improving corporate news flow and better-than-expected COVID-19 news in many countries. Recent economic data, when taken in aggregate, has also surprised to the upside. China’s services sector confidence (Caixin PMI), came in at 55 versus an expected contraction of 47.6, which buoyed markets. US employment data also came in better than expected, showing 2.5mn jobs added versus an expected 8mn additional unemployed.
Markets have continued to be reassured by global policy makers, who continue to deliver stimulus and remain open to providing additional help. The European Central Bank (ECB) expanded its Quantitative Easing (QE) programme by EUR600bn to EUR1,350bn on June 4th. Recent communication from the US Federal Reserve (the Fed) suggests it is contemplating further stimulus via ongoing asset purchases, forward guidance and possibly yield curve control. China announced additional fiscal stimulus worth 8.4% of Gross Domestic Product (GDP) at its National People’s Congress in May, and Germany added EUR130bn (c.4% of GDP) of stimulus in early June to help its economy recover. Globally, the amount of fiscal stimulus announced so far is more than double that seen during the Global Financial Crisis (GFC).