Global equities rose during August, supported by exceptionally strong corporate earnings and resilient economic activity. This occurred despite ongoing tensions in the Middle East and upward pressure on interest rates.
The global second quarter earnings season has been significantly stronger than expected and remains an important support for equity markets.
In the United States, the majority of companies in the S&P 500 exceeded earnings expectations. While technology and energy companies continue to lead the charge, the improvement has spread across a range of sectors.
Strong earnings have also been evident outside the United States. European companies have generally reported better-than-expected results, while Japanese corporate earnings growth has also remained strong.
New Zealand’s sharemarket gained 1.7% in August, taking the 12-month return to 8.4%. Supporting the market was positive economic data and corporate earnings updates.
The Australian sharemarket also rose, supported by a positive earnings season.
Longer-term inflation risks are weighing on bond markets, particularly longer-term government bond yields.
Supporting confidence in the outlook are strong company earnings, improving business activity, signs that underlying price pressures are becoming more manageable, and resilient economic growth. These influences appear to be outweighing the risks from higher long-term interest rates, elevated energy prices and ongoing geopolitical tensions.