The Harbour Outlook summarises recent market developments, what we are monitoring closely and our key views on the outlook for fixed interest, credit and equity markets.
Key points
- The prospect of a near-term trade deal between the US and China deteriorated during May as talks broke down, causing bond yields to tumble and global share markets to retreat from recent highs.
- Falling yields saw defensive, higher yielding equity markets, such as New Zealand and Australia, outperform.
- Domestically, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate to 1.50%, citing the deceleration in global growth and uncertainty around the global outlook as key determinants behind their decision.
Key developments
Global equity markets retraced from their highs in May with the MSCI World index (in local currency) returning -6.0%. Risk aversion picked up almost entirely due to the breakdown in trade talks between the US and China. This resulted in the US increasing tariffs on US$200 billion of Chinese goods; China promptly retaliated.