Key market movements - March 2025

International shares

-2.7% (hedged to NZD)

-3.6% (unhedged)

Developed share markets performed poorly in the first three months of 2025, primarily driven by weak performance in the US and Japan, with European shares providing some welcome buoyancy. 

The US market started the quarter strongly, reaching three new all-time highs before beginning a downward spiral in the back half of the quarter, ending down around -4%. US markets were primarily driven by uncertainty around the Trump administration’s policy path going forward, with markets wavering on key policies such as tariffs and migrant deportation throughout the quarter. Other factors that contributed to the sell-off in US shares include the US Federal Reserve’s decision to keep interest rates higher for longer and concerns about AI competition from China. 

The Japanese share market closed down -4% in the first quarter of 2025. This was primarily driven by a decrease in confidence among manufacturers (measured by the Manufacturing Tankan index) due to growing concern over US tariff policy. 

Eurozone markets had a strong first quarter, with the S&P Europe 350 rallying +6.1%. This strong performance was caused by several factors coalescing, increasing the likelihood of an economic recovery. The spark of the Eurozone rally was Germany’s aggressive fiscal stimulus plan, which included a €500 billion infrastructure fund and an increase in the defence spending limit. Several positive surprises in Eurozone economic indicators also bolstered the markets’ confidence.

Across most major currencies, the New Zealand dollar was stronger through the quarter which meant slightly higher reported returns for investors holding hedged foreign assets.  

Source: MSCI World ex-Australia Index (net div.)

 

Emerging markets shares

+1.5%

Emerging markets shares posted a solid first quarter of 2025 with the MSCI Emerging Markets Index posting a +2.7% gain in local currency. Major markets including China and key Latin American markets had a very strong quarter, while the share slump in India continued.

Chinese markets delivered a strong quarter with the S&P China 500 rallying +6.5%. Several economic indicators coming out of China have pointed to a stabilising and positive trajectory for the economy. Some examples include increased fixed asset investment growth and retail sales growth increasing to +4.1% and +4% respectively. Commitment from the central government to provide additional stimulus packages, and technological advancements from the likes of DeepSeek further boosted performance.

South Korea posted a strong gain of +5.3% in the first quarter. Markets in Latin America had a stellar quarter with the S&P Latin America BMI rising +13.2%. Highlights included gains of +5.6% from Brazil, +7.7% from Mexico and +15.2% from Columbia.

Taiwan closed the quarter down by over -9%, as its largest constituent, Taiwan Semiconductor Manufacturing Company was hit hard by fears of overinvestment in AI related infrastructure (semiconductors).

India continued its losing streak from the fourth quarter of 2024 to string together five consecutive months of losses, the most in over a decade. While the market reclaimed some ground in March, it still finished the quarter down -6.7%. The Indian economy has seen slowing growth and weak corporate profits as high inflation and low wage growth put pressure on household spending. The free-falling Rupee has only made matters worse by making the market less attractive to foreign investors.

Source: MSCI Emerging Markets Index (gross div.)

 

New Zealand shares

-6.2%

New Zealand’s S&P/NZX 50 Index gave back slightly more than the previous quarter’s gains in a disappointing start to 2025. 

Despite a steady decline throughout the quarter, the tone of NZ investors seemed to be ‘cautiously optimistic’. With inflation under control and the Reserve Bank cutting the Official Cash Rate to 3.75%, the market consensus is that we are through the worst of the downturn. So why was the market down -6.2% for the quarter?

As we know, markets dislike uncertainty, and while the economic position of the country does appear to be improving, we are also entering a period of heightened uncertainty. Economic recoveries are inherently unreliable, and the departure of Reserve Bank Governor Adrian Orr introduced another potential variable in terms of policy settings. External uncertainty has been further heightened as the world watches the US President decide who and what he wants to tariff. 

In addition, the labour market is yet to show signs of a recovery, with the unemployment rate rising to +5.1% in February. 

A2 Milk led the pack in the NZX50 this quarter, up around +40%, a result of stimulus packages in Asia aimed at families with babies. 

Other winners for the quarter included Vista Group (+21.6%) and Sanford Ltd (+19.1%).

On the other side of the ledger, Ryman Healthcare (-41.4%) announced a new $1 billion equity raise at a significant discount to its share price at the time of the announcement, leading to a sizable sell-off.

Source: S&P/NZX 50 Index (gross with imputation credits)

 

Australian shares

-3.3%

The Australian share market had a weak start to 2025, extending previous losses and nearing a technical correction, 10% below its all-time high.  

The Reserve Bank of Australia (RBA) began their interest rate cutting cycle in February, cutting their cash rate target by 0.25% from 4.35% to 4.10%. The RBA gained sufficient confidence that inflation is sustainably moving toward the midpoint of their 2-3% target range. However, they noted several upside risks still existed such as strong labour market data and maintained a cautious tone overall. As expected, the RBA held rates at 4.10% at the 1 April meeting amid a more volatile global economic landscape.

Losses were concentrated in the information technology sector, down -17.5% in the first quarter. The next worst performer was healthcare, down a little over -9%. Defensive sectors such as utilities, industrials and communication services were up small single digits.

Newmont Corp and Northern Star Resources were the two biggest winners in the top 50 ASX companies, up +30.2% and +20.3% respectively. On the downside, WiseTech Global and Mineral Resources were both down over -30%.

With the Australian dollar slightly weaker against the New Zealand dollar over the quarter, the reported returns to New Zealand investors were marginally lower than the index returns in the local Australian dollar.

Source: S&P/ASX 200 Index (total return)

 

International fixed interest

+1.3%

The first quarter of 2024 saw fixed interest yields converge across major markets. European bond yields lifted in early March while US bond yields declined throughout the quarter. 

In the US, riskier debt started the quarter strongly, however as uncertainty in the market grew, demand for long dated, high-quality bonds increased as the ‘flight to safety’ trade played out.

The US Federal Reserve (Fed) held interest rates steady in the first quarter, delaying any further rates cuts until the market has greater certainty around the impact of fiscal policy on the economy. The Fed is confident that the economy does not need to be stimulated by reducing rates, and inflation is now under control. As a result, they seem to be in favour of doing less and waiting for clearer signals in one direction or another before changing the policy rate. 

The US 10-year bond yield fell from 4.57% to 4.21% through the quarter, with the two-year bond moving from 4.24% to 3.89%, maintaining a positive yield premium for longer duration bonds. The Japanese 10-year rose from 1.08% to 1.47% and key European rates in Germany, Italy and France all rose around 0.30%. 

The European Central Bank cut key European interest rates twice in the first quarter, the Bank of Japan raised rates to 0.5% and the Bank of England cut rates to 4.5%.

The FTSE World Government Bond Index 1-5 Years (hedged to NZD) was up +1.3% over the quarter, while the broader Bloomberg Global Aggregate Bond Index (hedged to NZD) was up +1.1%. 

Source: FTSE World Government Bond Index 1-5 Years (hedged to NZD)

 

New Zealand fixed interest

+1.0%

The Reserve Bank of New Zealand (RBNZ) cut New Zealand’s Official Cash Rate (OCR) by another 0.50% to 3.75% in the first quarter. 

The key focus for the RBNZ has clearly now shifted to ensuring that inflation does not fall too far and send the NZ economy into a weaker position. NZ consumer spending is significantly lower and unemployment is rising. The RBNZ expects consumer spending and business hiring to pick up again once the lower OCR begins to impact the economy. 

On the back of a mixed global bond market, the NZ 10-year bond was effectively flat, moving down from 4.61% to 4.59%. 

The S&P/NZX A-Grade Corporate Bond Index gained +1.0% for the quarter, while the longer duration but higher quality S&P/NZX NZ Government Bond Index gained +0.6%.  

Source: S&P/NZX A-Grade Corporate Bond Index

 

Table 1: Investment class returns to 31 March 2025

Investment class	Index name	3 months	1 year	3 years	5 years	10 years
International shares	MSCI World ex Australia Index (net div., hedged to NZD)	-2.7%	+7.2%	+8.0%	+15.9%	+9.9%
	MSCI World ex Australia Index (net div.)	-3.2%	+12.8%	+15.1%	+17.3%	+12.7%
Emerging markets shares	MSCI Emerging Markets Index (gross div.)	+1.5%	+14.3%	+8.9%	+9.5%	+7.0%
New Zealand shares	S&P/NZX 50 Index (gross with imputation credits)	-6.2%	+2.1%	+1.3%	+5.4%	+8.7%
Australian shares		-3.3%	+3.8%	+6.3%	+14.7%	+8.0%
International fixed interest	FTSE World Government Bond Index 1-5 Years (hedged to NZD)	+1.3%	+5.2%	+2.6%	+1.2%	+2.1%
	Bloomberg Global Aggregate Bond Index (hedged to NZD)	+1.1%	+4.2%	+1.0%	+0.1%	+2.2%
New Zealand fixed interest	S&P/NZX A-Grade Corporate Bond Index	+1.0%	+7.2%	+4.2%	+1.8%	+3.3%
New Zealand cash	New Zealand One-Month Bank Bill Yields Index	+1.0%	+5.0%	+4.8%	+3.0%	+2.5%

Unless otherwise specified, all returns are expressed in NZD. We assume Australian shares and emerging markets shares are invested on an unhedged basis, and therefore reported returns from these asset classes are susceptible to movement in the value of the NZD. Index returns are before all costs and tax. Returns are annualised for time periods greater than one year.