Market overview

Global markets started January in a very positive fashion; then came Iran and then came the coronavirus. As coronavirus fears grew, markets pulled back and bonds rallied (yields fell to lows seen last September). The US market was flat for the month, while the UK market was down 3.4%, European markets down 2.6% and the Japanese market was down 1.9%. Emerging markets were weak as well, with Hong Kong down 6.7%.

The global government response to the coronavirus has been remarkable, with China placing entire cities into lockdown and extending the lunar New Year
holidays so that businesses and schools would remain closed and people at home.  Latterly other governments have restricted airline travel from China and otherwise closed, or partially closed, borders. At the time of writing, the number of new cases is still rising; however, if it follows the pattern of previous events, the rate of spread should soon slow. Nevertheless, this will have a significant impact on China’s economic growth, their trading partners (including Australia and NZ), and on the global supply chain. If the impacts are longer-lasting than we expect, then fiscal and monetary authorities are likely to respond with stimulatory measures.

Both the Australian (+4.7%) and NZ markets (+2.0%) were positive in January despite the global volatility. Companies directly exposed to China under-performed, and we look forward to the impending February reporting season for new information on company’s performance and outlook.

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