Brendan Larsen: Milford Asset Management expert on the market reactions to the ceasefire deal

Both US President Donald Trump and Iran have portrayed the last minute ceasefire deal as a victory for their nations.

The nations accepted Pakistan's proposal to pause fighting two weeks and Iran's agreed to reopen the Strait of Hormuz.

Milford Asset Management expert Brendan Larsen says shares in the US, Australia and New Zealand have gone up off the back of the news.

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Episode Transcript

Speaker 1 (00:00):
Heller duper see Allen here. The basic applications use keywords,
but that's fair, Heather. AI is great if you don't
want a job, but you're required to apply for a
job to stay on the benefit. Thank you, Roscoe seventeen
past six, Brendan Last and Milford Asset Managements with us
Allo Brendan Evening. How have the markets reacted to the
ceasefire deal?

Speaker 2 (00:18):
Yeah, look, some positive developments today around that, but still
I guess a lot to work through over the coming weeks.
Since the announcement, we have seen a material rally in
risky assets broadly on the back of the news, so
USh shares up around three percent and futures trading in
Australia and New Zealand shares up strongly as well. Invested
positioning and shares had reduced significantly over the last few

(00:39):
weeks in response to the conflict, and so some of
that is a reflection of that positioning as well as
the sort of reduced downside risk. Given these positive developments,
I think the reaction in Europe is going to be
interesting this evening as well. European markets had been hit
very hard given their reliance on energy imports and so
signs of a positive outcome should mean that europe assets

(01:00):
regained some of the losses they saw in March. The
US dollar was also weaker. On the back of this,
they used all had been kind of one of the
few places to hide over March. Sort of safe haven
attributes re emerged, and so it's logical that it sort
of underperforms as the risk of a prolonged conflict reduces.

Speaker 1 (01:18):
Now, what did you make of the Reserve Bank keeping
the ocr on hold today?

Speaker 2 (01:23):
Yeah? Look, look, I thought a lot of the release
was similar in tone to what we'd heard from from
the governor a few weeks ago. However, there was some
firming in language around their response to inflation, given that
oil prices had surged up until their forecast were struck
a couple of days ago. They did reiterate that the
New Zealand economy is entering this energy shock from a
much weaker starting point than in twenty twenty two, with

(01:45):
a looser labor market and subdued domestic demand, and so
all of these things should mean that spare capacity in
the economy should result in fewer second round impacts on
medium term inflation this time around. They also outlined some
sort of key indicators to watch influenced medium term inflation
and as such their policy response, which were things like
wage growth, inflation expectations, and core inflation. So we'll be

(02:09):
watching all of these things very closely from here.

Speaker 1 (02:11):
And what's been the market reaction?

Speaker 2 (02:14):
So market pricing for hikes moderated a little bit after
the statement, but this was reversed quite quickly. Following the
press conference, the governor was probed around the timing of
policy tightening and response to inflation, and some of her
responses were interpreted by the market as a little bit
more hawkish. We think the message was clear there are
upside inflation impacts from the energy shock in the near term,

(02:36):
but the focus for policy remains on medium term inflation,
which given spear capacity in the economy should be less
severe and so policy will react to medium term inflation.
Speare capacity does not contain second round effects, the oci
adjustments will be required.

Speaker 1 (02:51):
Yeah, good stuff. Hey, Thank you as always Brendan, Brendan
Lars and Milford Asset Management. For more from hither Duplassy
Allen Drive.

Speaker 2 (02:57):
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