Energy sector leads sharemarket lower

New Zealand shares fell after Rio Tinto quashed rumours production was ramping up at the Tiwai Point aluminium smelter; Fisher & Paykel Healthcare fell after rival ResMed reported disappointing earnings.

Friday, August 7th 2020, 6:33PM

by BusinessDesk

The S&P/NZX 50 Index fell 117.91 points, or 1 percent to 11,646.68. Within the index, 25 stocks fell, 16 rose and nine were unchanged. Turnover was $127.8 million.

The energy sector led the market lower after multinational mining company Rio Tinto shot down rumours it was planning to restart an aluminium production line shut earlier this year in response to the covid-1 pandemic.

Media yesterday reported the line may be restarted as soon as September, prompting speculation the Tiwai Point aluminium smelter may remain open beyond its planned closure in August 2021.

Shares of electricity companies that supply power to the smelter jumped on the rumour, but have given back much of that gain today. Contact Energy fell 3.2 percent to $6.10 and Meridian Energy declined 0.4 percent to $4.98.

"After being strong on reports Rio Tinto might be starting up the fourth potline at Tiwai, Contact picked up some comments today that it won't be restarting," which led to today's decline, said Matt Goodson, a managing director at Salt Funds Management.

Genesis Energy led the market lower, dropping 3.2 percent to $2.86.

F&P Healthcare was weaker, falling 2.9 percent to $35.41 after California-based competitor ResMed reported disappointing earnings result and dropped 14 percent on the New York Stock Exchange.

Goodson said investors will often trade one stock off news from the other given both firms manufacture sleep apnea products.

“The magnitude of the ResMed fall has led some people to worry that sleep apnoea numbers for FPH could be poor,” he said. “Although, ResMed is far heavier weighted to sleep apnoea and doesn’t have the same hospital products that FPH has.”

Pharmaceutical distributor Ebos Group fell 0.6 percent to $21.78.

Outside the benchmark index, ASX-listed Centuria Capital today crossed the 90 percent threshold needed to enforce mop-up provisions in its $169.5 million cash-and-scrip takeover. Shares of Augusta Capital were unchanged at 95 cents.

The technology sector was largely stronger. Faith-sector donations app provider Pushpay was the main driver, posting the day’s biggest gain, up 2.6 percent at $8.04.

Cinema software developer Vista Group International rose 0.8 percent to $1.24 but is still down 63.6 percent year-to-date.

In the US, President Donald Trump signed an executive order declaring a national emergency over teen social media app TikTok, banning it from the country unless its Chinese owners sell it in the next 45 days.

It is the latest spat in escalating tensions between the two superpowers as China has taken a more assertive stance on the global stage.

Goodson said the geopolitical backdrop for markets was getting more difficult and would continue to do so ahead of the US elections in November.

Those tensions weighed on dairy stocks with infant formula exporter A2 Milk Co down 1.6 percent at $20.52; its key supplier Synlait Milk dropped 2.5 percent to $6.65.

The NZ dollar shed some of its overnight gains as US-China tensions cooled investor risk appetite. The kiwi traded at 66.65 US cents at the local market close from a high of 66.90 cents during the day and 66.41 cents yesterday. The trade-weighted index was at 72.23 from 71.82 yesterday.

The local currency traded at 92.56 Australian cents from 92.20 cents yesterday, with the Aussie weaker after the Reserve Bank of Australia's quarterly monetary policy statement showed the central bank board won’t lift the cash rate until progress is made on its full employment and inflation targets. The statement noted Australia’s economic recovery is likely to be slower than expected due to the covid outbreak in Victoria.

The kiwi traded at 70.39 yen from 70.07 yen yesterday, 56.31 euro cents from 55.88 cents, 50.82 British pence from 50.53 pence, and 4.6423 Chinese yuan from 4.6103 yuan.

Tags: Market Close