NZ: Global financial market volatility has raised questions regarding possible contagion - ANZ

Global financial market volatility has staged a dramatic comeback, raising questions regarding possible contagion, broader asset price corrections and a negative hit to growth, according to analysts at ANZ.

Key Quotes

“We are watchful and will be keeping a close eye on broader financial conditions (which have tightened only modestly so far). While we think decent global growth can persist for a while and inflation looks unlikely to surge higher, higher volatility is something that looks here to stay as markets transition to a world where central bank liquidity is less abundant. While more ‘normal’, it does present a less favourable backdrop for risk assets, all else equal.”

“For New Zealand, we see few reasons to change any of our core views yet. A stronger external balance sheet means the economy is more resilient to shocks, although our asset prices have also benefited from low global interest rates, so we can’t completely turn a blind eye. But for now, we see it primarily as another factor that leaves us comfortable with our cautious views on the RBNZ, and our belief that at these levels, the NZD will remain on the defensive.”