New Zealand shares were back in the red as US President Donald Trump’s tariffs versus the world came into effect, while the Reserve Bank cut its key interest rate and left the door open to further reductions.
The S&P/NZX 50 index fell 84.89 points, or 0.7%, to 11,806.55 as Trump’s Liberation Day tariffs went live, threatening to damage international trade and slow growth across Asia.
Meanwhile, the Reserve Bank lowered the official cash rate 25 basis points to 3.5% as expected, while signalling scope for it to go lower as the impact of Trump’s tariffs becomes clearer. India’s central bank also cut its key lending rate a quarter-point to 6% and adopted an accommodative stance.
“The market’s pricing in a 2.75% terminal rate, while the RBNZ has said in the last update that it would go to 3.1% - so there’s 35 basis points from where the market and the RB have it ending,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene. “People are going to be calling for a 50 basis point cut in May if the uncertainty does persist.”
The kiwi dollar traded at 55.46 US cents at 5pm in Auckland from 55.48 cents at 7am and down from 56 cents yesterday.
Chinese stock markets were buoyed by state support to soften the blow of the 104% tariff levelled by the US, with the Shanghai Composite up 0.2% in early afternoon trading. Hong Kong’s Hang Seng fell 1.6% and Australia’s S&P/ASX 200 index fell 1.9%, with the stock exchange operator facing delays to settlements due to the heightened trading volumes.
Who blinks first?
Greg Smith, head of retail at Devon Funds Management, said it’s almost a game of chicken between the US and China as to which superpower blinks first.
“The longer it goes on, the more pressure Trump gets,” he said.
Vulcan Steel led the NZX50 lower, falling 3.7% to $7.30, while Fonterra Shareholders’ Fund units declined 3.1% to $5.41 and Vista Group International slipped 2.9% to $3.32.
Healthcare stocks were broadly weaker after Trump flagged pharmaceuticals were next on the tariff radar. Fisher & Paykel Healthcare fell 1.6% to $33, while AFT Pharmaceuticals declined 2% to $2.45 and Pacific Edge dropped 5.3% to 12.4 cents. Ebos Group bucked the trend, rising 0.9% to $37.80.
Warehouse Group posted the biggest gain on the benchmark index, rising 3.8% to 83 cents, having hit a record low yesterday. Westpac Banking Corp advanced 2.9% to $32.50.
Spark New Zealand was the most heavily traded stock with a volume of 4.2 million as it fell 1.7% to $2.04, while Kiwi Property Group declined 2.9% to 85 cents on a volume of 3.1 million, and Precinct Properties New Zealand decreased 0.9% to $1.10 with 2 million shares changing hands.
Tourism Holdings rose 1.3% to $1.60 after the rental campervan operator said Canada’s retaliatory tariffs on the US will increase the value of its US-made fleet in Canadian territory, but the ultimate impact remains unclear.
Reporting by Paul McBeth. Image from Curious News.
