Market Commentary

Global markets were almost uniformly upbeat in March as investors doubled down on expectations for lower interest rates over coming months, with debate now centred on when, not if.

This was despite the spectre of inflation lingering in some corners. US consumer prices grew at a surprisingly brisk pace in February, while oil prices flirted with year-to-date highs as Russia’s supplies came under threat. It wasn’t enough to rain on the parade in US markets, though, as robust data signalled an economy gearing up for a soft landing. The optimistic mood spread to previously overlooked sectors and stocks, broadening a rally that had been almost wholly driven by a handful of mega-cap tech names.

The economic narrative was more subdued at home on the back of a woeful earnings downgrade cycle, unemployment set to creep higher, and confirmation that we ended last year in a technical recession. However, local investors tuned out the noise of a limping economy to focus on potentially better days ahead and bargain hunting in a bottomed-out market.

Meanwhile, weak commodity prices weighed on Australia’s resource-heavy market for much of the month. But investors’ spirits were later revived by a jobs market that didn’t get the economic downturn memo. Unemployment slid to 3.7% in February from 4.1% the month before as employers took on triple the forecast number of additional staff.

Against this backdrop, the S&P 500 rose by 3.1% in March, while the tech-focused Nasdaq returned 1.8%. The NZX 50 ended the month up 3.1% and the ASX 200 rose by 2.6%.

Meanwhile, the UK’s FTSE 100 enjoyed a rare lead among its main global peers, ending the month up 4.2% as inflation eased by more than almost everyone expected, central bank boffins included. This spurred an about-face from some of the Bank of England’s more hawkish monetary policy setters who started murmuring about interest rate cuts.

However, Japan’s Nikkei was the best-performing market of all after its central bank went against the grain and hiked short-term interest rates for the first time in 16 years, ending its negative rates regime after nearly eight years.

GBP and AUD / NZD exchange rate change from 29 February 2024 to 29 March 2024: