Less gloomy outlook boosts kiwi; NZ shares rise

The New Zealand dollar was stronger as local investors were buoyed by a less pessimistic outlook for the labour market in the Treasury's pre-election forecasts.

Wednesday, September 16th 2020, 6:11PM

by BusinessDesk

The pre-election economic and fiscal update showed a less severe hit to the economy from the covid-19 pandemic in the short-term, although it projected a slower recovery in coming years.

“The market appears to have fixated itself on the reduced unemployment rate forecast in that release,” said Mike Shirley, a senior trader at Kiwibank.

“From a market perspective that is a net positive and it was reflected in the currency.”

The latest forecast project the unemployment rate peaking at 7.8 percent in the March quarter of 2022, having previously predicted it rising as high as 9.8 percent in the current September period.

The kiwi dollar was trading 67.27 US cents at 5pm in Wellington, largely unchanged from 67.23 cents yesterday, but about a fifth of a cent up from midday before the release.

The trade-weighted index was at 72.09 at 5pm, from 72.08 yesterday. The kiwi traded at 91.91 Australian cents, up from 91.74 cents, at 70.83 yen from 71.04 yen, 56.77 euro cents from 56.50 cents, 52.16 British pence from 52.25 pence, and 4.5556 Chinese yuan from 4.5618 yuan.

The impact of the less gloomy local economic outlook was more marginal on the stock market, with equities investors already following a strong lead from Wall Street in anticipation that the US Federal Reserve will reaffirm its policy of lower interest rates for longer.

The S&P/NZX 50 Index rose 43.96 points, or 0.4 percent, to 11,814.71. Within the index, 21 stocks rose, 19 fell and 10 were unchanged. Turnover was $171.1 million.

“There is a positive lead out of the US flowing through to the New Zealand market, and the Treasury estimates being slightly better in the short-term and slightly worse in the long-term,” said Grant Davies, an investment adviser at Hamilton Hindin Greene.

Some investors were confident buying with the expectation that the Fed would indicate more market-favourable policy in its statement tomorrow, ANZ economists said in a note.

“The market is being led by lower interest rates and the Fed’s moves expanding its balance sheet have been a huge tail wind for the markets generally,” Davies said.

Retailer Kathmandu Holdings led the market higher, rising 2.5 percent to $1.22. Retirement village operator Arvida Group was also up 2.5 percent at $1.67.

The country's biggest listed company, Fisher & Paykel Healthcare rose 1.1 percent to $33 after falling yesterday, while A2 Milk rose 0.5 percent to $18.17.

Spark New Zealand rose 1 percent to $4.80 after announcing a new three-year strategy in which it aims to simplify the business and increase annual revenue by almost $300 million.

Davies said Spark investors will be happy with the company’s performance over the past few years and talk of growing dividends is attractive when interest rates are “in the basement”.

Air New Zealand has proposed 385 cabin crew redundancies as the airline continues to shrink in response to the covid-19 pandemic. The airline’s share price was unchanged at $1.355.

Auckland International Airport reported total passenger volumes decreased by 85 percent in August compared to the same month a year earlier. That was a sharper year-on-year decline than in July due to the Auckland lockdown. Its share price rose 0.4 percent to $7.13.

Corporate travel software firm Serko gained 5.9 percent at $4.70. It joins the NZX50 next week.

Sky Network Television posted the day’s biggest loss, falling 3.2 percent to 15.2 cents.

Tags: Market Close