New Zealand’s S&P/NZX 50 index dipped its toe into the red as investors shrugged off the latest international headlines and turned their attention to the local earnings season and looming central bank policy review.
The NZX50 decreased 3.5 points, or 0.03%, to 12,913.95, on a turnover of $156.8 million after Contact Energy confirmed it will join the MSCI global standard index at the end of the month, with Mercury NZ departing.
The local bourse struggled for direction, clawing back earlier losses in the final matching session, with stock markets across Asia mixed. Australia’s S&P/ASX 200 index was up 0.5% in late trading, while Japan’s Nikkei 225 index increased 0.2% and Singapore’s Strait Times Index dipped 0.04%.
US Federal Reserve chair Jerome Powell’s testimony to the Senate Banking Committee didn’t ruffle too many feathers, as he said the world’s biggest economy remained in good health and that there isn’t anything to rush the US central bank into cutting rates further.
The kiwi dollar traded at 56.65 US cents at 5pm in Auckland from 56.52 cents at 7am and 56.42 cents yesterday, and was little changed at 89.91 Australian cents form 89.95 cents. Two-year swap rates rose 4 basis points to 3.48% and 10-year swaps were up 8 basis points at 4.16%.
“Earnings are probably trumping President Trump at the moment,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “Bond markets are potentially seeing some policies in place that could be inflationary.”
Meanwhile, local investors are turning their mind to the domestic earnings season which kicked off with Vulcan Steel yesterday and begins in earnest next week.
They’ve also got one eye on the Reserve Bank’s policy review next week.
How low will they go?
ANZ New Zealand economists kept their prediction for the Reserve Bank to cut the official cash rate half a percentage point to 3.75% next week.
They anticipate just one more cut after next week’s meeting but note there’s a risk the Reserve Bank will cut further.
“Assuming we don’t see a big change in the RBNZ’s track, we don’t think we will see significant market moves on the day, and volatility (in FX and interest rate markets) will likely continue to be driven by offshore events,” ANZ NZ chief economist Sharon Zollner said in a note.
Ryman Healthcare led the local bourse lower, slipping 1.6% to $4.430, while Spark New Zealand declined 1.6% to $2.85 on a volume of 4.1 million.
Tourism Holdings fell 1.1% to $1.88, while Auckland International Airport decreased 1.5% to $8.62 and Air New Zealand increased 0.8% to 64 cents. European travel and tourism stocks were weaker overnight after the continent’s biggest travel operator TUI said bookings growth had slowed for the coming year.
Media companies were generally weaker after the government opened consultation on proposals to make the sector’s regulatory environment fit for purpose and support domestic production. Sky Network Television fell 1.5% to $2.56 and NZME slipped 1% to $1.04.
Genesis Energy rose 2% to $2.315 after saying it’s working with the other major electricity generator-retailers to examine extending the life of the coal- and gas-fired Huntly power plant to help ease supply risks. Meridian Energy slipped 0.4% to $5.95.
Buy the rumour, sell the fact
Meanwhile, Contact declined 0.5% to $9.25 on a volume of 3.4 million and Mercury NZ gained 3.3% to $6.60 with 2.6 million shares traded after confirming speculation they’d switch places on the MSCI index.
Manawa Energy, which is subject to a merger with Contact, gained 3.4% to $5.48, posting the biggest gain on the index.
And Infratil, which controls Manawa, increased 0.1% to $11.11.
Santana Minerals slipped 2.3% to 64.5cents as gold futures prices eased from their record, slipping 0.7% to US$2,910.40 an ounce.
Financial stocks were broadly stronger after Commonwealth Bank of Australia lifted first-half cash earnings 2% and hiked its dividend. Its New Zealand subsidiary, ASB Bank, reported a 2% increase in net profit as net interest margins widened.
ANZ Group Holdings rose 1% to $34.83 and Westpac Banking Corp advanced 1.1% to $38.41, while Heartland Group Holdings increased 2.8% to $1.11.
Fishing group Sanford was gained 1.1% to $4.70 after the government sought feedback on proposals to loosen industry regulation.
Reporting by Paul McBeth. Image from Curious News.
This story has been updated to correct the Contact and Mercury trading volumes.
