Global shares

Global share markets made strong gains in the September quarter, with the MSCI ACWI Index – Net returning 7.1% in unhedged NZD terms. In hedged NZD terms, returns were more modest (0.9%). Much of the gains can be attributed to expectations slowing global growth and ongoing trade disputes will force more central banks to cut interest rates.

During the period, we saw further evidence global manufacturing activity is weakening, with the latest flash purchasing manager indices in the US, Europe and Japan continuing to underwhelm. At the same time, a lack of meaningful progress in US-China trade negotiations sparked fears that a protracted trade war could eventually push the global economy into recession.

In response, the US Federal Reserve (Fed) cut rates twice, while both the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) lowered their respective cash rates to record lows. Elsewhere, the European Central Bank reduced its deposit rate and introduced fresh stimulus measures; notably the resumption of quantitative easing.

Stocks in the US (1.2%1) hit further highs on the back of looser monetary policy and the Fed’s commitment to act as appropriate to sustain the country’s current expansion. Share markets in Europe (2.8%2) and Japan (2.3%3) were also positive for the quarter, while stocks in China (-0.3%4) and the UK (-0.2%5) weakened, albeit modestly. China’s share market was impacted by evidence the country’s trade war with the US is hurting growth, while UK stocks struggled as Brexit uncertainty reached new heights.