The NZ share market rose 5.6% easily out-pacing the UK, the US, Australia, and just ahead of China’s 5.5%. There was no particular company specific news to drive the NZ market so hard. Rather, global bonds rallied (yields fell) throughout the month as the market digested the dovish stance of the US Federal Reserve, and the US yield curve inverted for the first time in a decade. Historically an inverted yield curve in the US has presaged a recession is coming – we know winter is, but we are not convinced a recession is.

NZ’s yield heavy share market benefited from the global enthusiasm for yield stocks and local dividend reinvestment, and then late in the month the Reserve Bank of New Zealand kept the Official Cash Rate (OCR) on hold but said in the accompanying statement that the more likely direction of the next OCR move is down. This confirmation of an easing bias saw the interest rate sensitive sectors accelerate further. Top performers were Meridian (+16%), Chorus (+15%) and Genesis (+15%), while Kathmandu (-11%), ANZ (-6%) and Sky Television (-6%) were the worst performers for the month.

In Australia, Real Estate was the top performing sector (driven by lower bond yields), followed by Telco’s and Consumer Staples, while Energy and Financials under performed. The Australian housing market continues to slide, with credit conditions remaining tight.