New Zealand’s share market was broadly weaker as investors pondered the prospect of more cautious interest rate cuts after the recent ebullience in domestic business confidence surveys fizzled out and the soggy kiwi dollar threatened to push up costs for firms.
The S&P/NZX 50 index fell 74.66 points, or 0.6%, to 12,928.38, on a turnover of $127.1 million across the main board, after the ANZ business outlook showed firms’ confidence about the economy and their expectations for their own activity pulled back a little from their heady peaks.
“Both of these are still relatively high readings – coming off what were at or near 10-year highs in December – but they go against the run of strong gains in recent months,” Westpac NZ senior economist Michael Gordon said in a note. “It’s not entirely surprising that we’d see some pullback on these forward-looking measures – the gap between expectations and recent performance had become unusually wide in recent surveys.”
Auckland International Airport led the benchmark index lower, falling 2.5% to $8.60, while Port of Tauranga decreased 1.4% to $6.37. Economic bellwether Freightways slipped 0.7% to $10.66 and global logistics firm Mainfreight declined 1.2% to $71.37.
Among other listed firms typically tied to the economic cycle, Fletcher Building dropped 2.4% to $2.86 and Spark New Zealand decreased 0.7% to $2.92 on a volume of 1.9 million shares, the most on the NZX50.
The ANZ survey showed firms felt the pinch of increased costs, with more thinking about passing those on to the consumer.
Westpac’s Gordon said some of that reflected the weak kiwi dollar – trading at 56.66 US cents at 5pm in Auckland from 56.60 cents yesterday – and that the Reserve Bank will need to be mindful of that as it moves towards a more neutral level for the official cash rate.
“The case for outright ‘easy’ monetary policy conditions is not clear,” he said.
Central bank centrality
That comes as the US Federal Reserve pauses its loosening of monetary policy, keeping the federal funds rate in a range of 4.25%-to-4.5% and indicating it’s not in any rush to cut again, raising the ire of US President Donald Trump who returned to the White House on a wave of discontent that included the higher cost of living in the US.
The Hong Kong Monetary Authority also kept its base rate unchanged at 4.75%, while the Bank of Canada and Sweden’s Riksbank lowered their rates and the European Central Bank is expected to cut overnight.
New Zealand’s two-year swap rate was unchanged at 3.46% while the 10-year swap increased 2 basis points to 4.5%.
The $500 million of government debt sold at the New Zealand Debt Management’s weekly tender received $1.72 billion of bids, with the 2036 series – paying a coupon of 4.25% - the most in demand, selling at an average yield of 4.66%.
The power companies were mixed, with Meridian Energy slipping 0.3% to $5.83 after signing a power purchase agreement with Harmony Energy for its joint venture to build a 150-megawatt solar farm in Waikato.
Mercury NZ rose 3.4% to $6.34 on a volume of 1.3 million after remaining the favourite among Craigs Investment Partners analysts, who rate Mercury and Meridian overweight, while being neutral on Genesis Energy up – 0.9% at $2.22 – and Contact Energy, down 1.4% at $9.27.
Sky Network Television poste the biggest gain on the NZX50, up 3.6% at $2.90 and snapping a two-day decline where it attracted criticism over the reliability of its satellite service as it prepares to migrate to a new satellite.
Being AI increased 1.8% to 28.5 cents on very light trading. Late in the session the company said chair Andy Higgs will leave the board effective from 5pm on Friday, joining independent director Brett O’Riley out the door.
Reporting by Paul McBeth. Image from Curious News.
