CIP INVESTMENT MARKET COMMENTARY
Prepared by Peter Collerton, Capital Investment Planning Ltd
July saw mixed market performance. The US S&P 500 was down -1.0% for the month and is now down -12.9% for 1 year. The UK FTSE100 is moving in line with the S&P 500, down -14.9% over 1 year also. Europe and Asia were mixed with Hong Kong up 2.8% and France down -1.0% over the month.
Closer to home the ASX All Ords was down -5.2% in July and now down -18.3% over 1 year. The NZSE 50 has fared better and rose 4.4% in July but is at -20.8% for 1 year.
The NZD fell against all currencies over the last month as the first interest rate cut took place.
The Reserve Bank made the first 25bp rate cut to 8.0% in the OCR at the end of July. This was expected by the markets and yields have fallen accordingly. The ninety day bank bill yield has fallen 0.50% over the last quarter. The markets are factoring in further falls and it is expected rates will fall by 1.25% to 1.5% by mid 2009.
Correspondingly exchange rates have fallen with the NZD/AUD now down at 0.79 cents from over 0.87 cents three months ago. The NZD/USD is down to 0.69 cents from its peck of 0.81 cents only 4 months ago.
This easing will be bringing relief to exporters who will be more competitive with pricing and see profits increase over the coming months due to the change in exchange rates. The easing also gave some slight relief to some mortgage rates.
At the beginning of the year we looked at the possibility of a global food crisis because food staples were rocketing. See the charts below.
Source: FOA of the United Nations
Prices have stabilised with only Oils and Fats continuing to rise due to demand for biofuels.
Production indicators for the northern hemisphere are shown in the pricing trend with good forecast growth in the supply of wheat and barley which has helped ease price pressure. The exception is maize where lower amounts have been planted because of a wet spring in the US (the largest producer in the world).
Dairy prices have fallen over the last six months but will the trend continue?
Source: FOA of the United Nations
As can be seen in the chart stocks of dairy product in the EU are now non-existent. Production is also expected to be down this year due to drought here and in Australia although the US is seeing an increase in production.
This may lead to an increase or at least stabilisation at current prices.
Meat prices are an exception to the price rises for other food commodities over the last year or so. It is expected that meat prices will come under greater pressure over the rest of 2008.
Source: FOA of the United Nations
Oil prices have also eased and it appears we are now seeing some general stabilisation over a range of prices. Whether these trends continue or more bad news hits is the continuing quandary.
as at 31 July 2008
|
1 Year |
3 Years |
5 Years |
|
Avg % p.a. |
Avg % p.a. |
Avg % p.a. |
| Inflation (Jun 08) |
4.0 |
3.1 |
2.7 |
| GDP real (Mar 08) |
1.9 |
2.3 |
2.9 |
| Housing (Mar 08) |
2.8 |
9.7 |
16.1 |
|
|
|
|
|
| 6 month Deposit |
8.3 |
7.7 |
7.1 |
| 90 -day Bank Bill |
8.8 |
8.2 |
7.6 |
|
|
1 year ago
|
3 years ago
|
5 years ago
|
| NZD/AUD (rate x years ago) 0.7848 |
0.9065 |
0.9029 |
0.8854 |
| NZD/GBP (rate x years ago) 0.3798 |
0.3864 |
0.3876 |
0.3606 |
| NZD/USD (rate x years ago) 0.7553 |
0.7858 |
0.6794 |
0.5860 |
|
|
|
|
| NZD/AUD (% chg) |
15.5 |
15.0 |
12.8 |
| NZD/GBP (% chg) |
1.7 |
2.1 |
-5.1 |
| NZD/USD (% chg) |
4.0 |
-10.0 |
-22.4 |
|
% return p.a.
|
% return p.a.
|
% return p.a.
|
| NZSX 50 Gross Index |
-20.8 |
-0.2 |
n/a |
| ASX All Ords Gross Index NZ$ |
-18.3 |
5.4 |
12.5 |
Hang Seng (Hong Kong) |
-2.0
|
17.6
|
24.9
|
|
Nikkei 225 (Japan) |
-22.4 |
4.1 |
8.0 |
| SSE Comp (China) |
-37.9 |
52.1 |
17.6 |
| S&P 500 (USA) |
-12.9 |
0.9 |
5.6 |
| FTSE 100 (UK) |
-14.9 |
0.8 |
6.0 |
| GDAX (Germany) |
-14.6 |
10.9 |
17.2 |
| CAC40 (France) |
-23.6 |
-0.4 |
7.4 |
| MSCI World Index NZ$ |
-5.8 |
5.0 |
7.4 |
|
|
% change p.a.
|
% change p.a.
|
% change p.a.
|
| Gold |
47.6 |
43.7 |
36.0 |
| Oil |
64.6 |
42.7 |
70.1 |
Prepared by Peter Collerton, Capital Investment Planning Ltd, August 2008
Capital Investment Planning Ltd, P.O. Box 22238, Christchurch, New Zealand
Phone +64 3 379 1913 Fax +64 3 377 2330
Important Note. This publication may be copied in whole or part provided Capital Investment Planning Ltd is acknowledged as the source. Investment and mortgage rates are indicative only and, whilst correct at the time of publication, are subject to change without notice. Text may be opinion only and should not be seen as a substitute for personal professional advice relative to an individual's personal situation.
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