New Zealand’s share market was led lower by tech stocks as government bond yields crept to a three-and-a-half week high after US inflation data prompted investors to rein in expectations for the Federal Reserve’s planned interest rate cuts.
The S&P/NZX 50 index decreased 7.97 points, or 0.1%, to 12,905.98 with turnover of $134.9 million across the main board.
Tech stocks, whose valuations are prone to fluctuate with interest rate movements, were broadly weaker as investors pared back their expectations interest rate cuts in the US after the inflation data.
Vista International Group led the benchmark index lower, down 3.3% at $3.18, while Gentrack declined 1.8% to $12.25 and Serko fell 1.6% to $3.69.
That didn’t extend to all tech companies, with minnow Black Pearl Group snapping a seven-day decline as it jumped 28% to 86 cents. The National Business Review profiled the company’s new Bebop product.
The yield on New Zealand’s 10-year government bond rose 10 basis points to 4.67%, with rates markets also digesting a $5.5 billion government bond syndication earlier this week. The kiwi traded at 56.50 US cents at 5pm in Auckland from 56.60 cents at 7am and 56.65 cents yesterday.
Meanwhile, local economists firmed up their forecasts for the Reserve Bank to cut the official cash rate half a percentage point to 3.75% next week, with respondents to the central bank’s survey of expectations predicting the pace of inflation to stay around the 2% midpoint of the target band.
ASB Bank senior economist Mark Smith said the central bank will be encouraged by the survey.
“The fall in long-term inflation expectations could potentially feed through into lower RBNZ estimates of the neutral OCR, all else equal,” Smith said in a note. “A lower neutral OCR (if sustained) could mean a higher degree of OCR cuts could be needed.”
Back to business
Corporate earnings season continued on both sides of the Tasman, with Skellerup slipping 0.6% to $5.17 after reporting an 11% lift in first-half earnings before interest and tax, and hiking its interim dividend 6% to 9 cents per share. The rubber goods maker has warned it faces a tough global environment, given it’s exposure to potential US tariffs.
Vulcan Steel rose for a third day, up 4.6% at $8.41. The steel products maker has been gaining since projecting a revival later this year after what’s been challenging trading conditions.
Mercury NZ dropped 2.9% to $6.41, giving up some of yesterday’s gains when it was confirmed that the power company will leave the MSCI global standard index at the end of the month. Contact Energy, which replaces it, increased 0.4% to $9.29.
Retailers were mixed after government figures showed softer than expected consumer spending on credit and debit cards in January.
Westpac NZ senior economist Satish Ranchhod said the pullback followed a very large gain in December, and that the longer-term trend was more positive.
“The financial pressures that households have been wrestling with are easing, with inflation dropping back and interest rates falling,” he said in a note. “Over time, those easier financial conditions will support further increases in spending and will also boost the housing market.”
Warehouse Group rose 1% to $1.02, while Hallenstein Glasson Holdings slipped 0.6% to $8.55 and KMD Brands fell 1.2% to 40 cents. Briscoe Group decreased 0.6% to $4.72.
SkyCity Entertainment Group posted the biggest gain on the NZX, up 4.3% at $1.47.
NZX rose 1.3% to $1.54. Across the Tasman, the ASX reported a boost in trading volumes.
Ebos Group was unchanged at $42.20, with Sigma Pharmaceutical rallying on its first day as a merged entity with Chemist Warehouse. Green Cross Health gained 6.4% to 83 cents.
Reporting by Paul McBeth. Image from Markus Spiske on Unsplash.
