Australian shares reached five-and-a-half-year highs
yesterday, as smaller investors joined the market.
The NZX-50 traded above 4800 points for the first time,
closing at 4802, or up 5.8% on Friday's close.
On the same day last year, the NZX was at 4004 points. The
NZX gross index is made up of capital movements plus
In Australia, banking and resources stocks are in firmer
territory, following strong gains on Wall Street on Friday
Craigs Investment Partners broker Chris Timms said markets
rallied strongly as the United States Government averted
running out of funding and agreed to a short-term solution
which ended a 16-day government shutdown.
Low interest rates were encouraging people into the
However, he warned the 11th-hour agreement from the two sides
merely delayed the same issues until another day.
The agreement brought an end to the government shutdown,
extended funding until January 15 and suspended the debt
ceiling limit until February 7.
There were no major alterations to the Affordable Care Act,
known as Obamacare, the key point of contention and the
reason the Democrats were claiming the deal as a win for
them, he said.
''This remains a short-term solution only, as we have become
accustomed to in Washington. While the pressure is off for
the rest of this year, January and February 2014 will
potentially bring the debate back into focus and we could go
through a similar period of uncertainty,'' Mr Timms said.
There would be a negative effect on economic growth for the
coming three months. Economists were estimating a negative
impact on growth in the three months ended December of about
Over the next month, the economic data out of the US was
either going to be late and much less timely or somewhat
questionable because of the impact of the shutdown.
''We might miss a few reports altogether simply because
no-one was at work to complete the surveys.''
The reliability of the data would be reduced because not as
much could be read into the outcomes as usual, he said.
The Labour Department would release the US September
employment report tomorrow after a delay of more than two
The October employment report would be released one week
later than scheduled, on November 8, as statistical surveys
had been delayed.
Federal Reserve tapering of the bond-buying programme, known
as quantitative easing, was almost certainly off the table
until next year, Mr Timms said.
The Fed had previously said any moves were dependent on data.
With a data vacuum and some less reliable indicators, the Fed
would not rely on it nearly as much as it would have before,
even if the data looked strong.
The Fed would also be conscious of the effect recent events
had had on growth, as well as the potential replay of the
debate in January and February.
The market was now shifting its consensus expectation to the
Fed meeting in mid-March for the first reduction in monthly
bond purchases from $US85 billion ($NZ100 billion) to $US70
''The key impact of this new set of expectations is we will
have a more positive backdrop for equities through until the
end of the year, with ongoing central bank support likely to
keep rates low and shares in vogue.
''The New Zealand and Australian currencies should also stay
up around current levels, without the threat of tapering
there in the near-term to give the US dollar any sort of
boost,'' Mr Timms said.