September turned out to be another busy and interesting month for markets, with the local stock market being dominated by capital raising and takeovers. Auckland Airport raised $1.4 billion and Fletcher Building issued $700 million of new shares to reduce what is referred to as its ‘debt and leverage ratio’. Contact Energy also made a (likely successful) takeover offer for Manawa (formerly Trustpower), and rest home provider Arvida received the necessary shareholder approval to complete the sale of the company to Stonepeak Alps. Despite this flurry of activity, our local NZX50 index finished the month down a smidge (circa -0.2%).

One of the most iconic global homeware and storage brands filed for bankruptcy in September, amid a mountain of debt and shrinking sales. As aptly quoted in the news, ‘The Tupperware party is over’. Many New Zealanders will remember the infamous Tupperware parties of the 1970’s & early 80's. It is sad that such an iconic company hit the wall; one of a growing list of victims of not evolving fast enough to meet changing consumer demands. 

Turning to the local economy, New Zealand’s GDP for the June 2024 quarter came in stronger (or more accurately, less negative) than many economists expected. Surprisingly, manufacturing activity was reported as the strongest it had been since December 2021. Although the announcement was positive,on the flip side  we saw the economy shrink by 0.2% quarter-on-quarter, remaining “soggy” at best.

There were unexpectedly strong results when it came to September’s business confidence data, close to the 2014 levels of optimism. It’s hard to decipher where exactly this little glimmer of hope is coming from, especially given some of the gloomier economic data. It may be based on decreasing interest rate forecasts and the likely resulting benefits of consumers having more disposable income.

Over in the US market, the Fed (America’s reserve bank) cut rates by the largest amount seen in 16 years, cutting by 50 basis points (0.5%). An aggressive move like this usually signals the end of the fight against inflation and was seen as necessary to ease some of the cost of living pressure faced by many Americans. The US market’s reaction was mixed,  having initially jumped following the announcement, but eventually finishing trading the day of the announcement in the red - the devil is in the detail it seems.

The US main index, the S&P 500, had yet another positive month ending up 2.02% up. This is off the back of a very strong year, with YTD growth of 20.8%. What is interesting about September is that we finally started to see some other shares outside of the ‘Magnificent Seven’ tech giants start to shine when it came to strong growth.

The local government bond market had another positive month and for the past 12 months to the end of September has recorded a double-digit return of just over 11.6%. The focus now shifts to New Zealand’s Reserve Bank (RBNZ)  announcement in October. Current market pricing suggests a 50 basis point (0.5%) cut, although the RBNZ are suggesting a more conservative 0.25%. Only time will tell how much relief home owners will get!

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