Global markets dip as US Fed disappoints

New Zealand shares fell in sync with global markets after the US Federal Reserve failed to deliver new stimulus as investors had hoped.

Thursday, September 17th 2020, 6:38PM

by BusinessDesk

The S&P/NZX 50 Index fell 37.58 points, or 0.3 percent, to 11,777.13. Within the index, 16 stocks fell, 23 rose and 11 were unchanged. Turnover was $262.9 million.

As was widely expected, the US Federal Open Market Committee held its key rate on hold, but investors seemed disappointed about its view of the economic recovery outlook.

Markets across Asia fell, tracking the overnight close on Wall Street where the Fed’s statement had a fleeting impact on US stocks before closing the day weaker.

Australia’s S&P/ASX 200 fell 1.1 percent in late trading, Hong Kong’s Hang Seng dropped 1.7 percent, Japan’s Topic Index declined 0.4 percent and mainland Chinese indices were each down 1 percent.

NZ’s local benchmark outperformed much of the region despite being hit with the release of the official gross domestic product number, showing a record quarterly contraction of 12.2 percent.

The figure was not as dire as originally forecast, but Stuart Williams, head of equities at Nikko Asset Management, said this didn’t change the fact it was a significant decline.

“There is no good news in that, saying that it is less bad than forecast; it is still very bad.”

The quarterly decline was a “stark contrast” to the NZX 50 which is currently up 2.6 percent year-to-date.

“Within the average loss of GDP there are of course winners and losers,” Williams said.

Mercury NZ led the market lower, shedding 3 percent to $4.95, followed by Spark New Zealand which fell 2.4 percent to $4.685. Both companies are exposed to the domestic economy, although Spark also shed rights to a 12.5 cent dividend.

Other utilities were also weaker, Genesis Energy fell 1 percent to $2.88, Contact Energy declined 0.9 percent to $6.33 and Vector dropped 0.9 percent to $4.40.

Internet infrastructure firm Chorus also declined 1.7 percent to $9.06, although it is not considered to be sensitive to cyclical conditions.

Fisher & Paykel Healthcare dropped 1.7 percent to $32.45 and A2 Milk Company declined 1.6 percent to $17.88.

The major mover of the day was Heartland Group Holdings which rose 5.9 percent to $1.26 after reporting it expects to lift profit by as much as 18 percent in the current year as it grows its motor, business and reverse mortgage lending.

Despite the GDP figure being in line with expectations, the kiwi dollar dropped from 67.20 US cents before the announcement to be trading at 66.85 cents at 5pm in Wellington, down from 67.27 cents yesterday.

The trade-weighted index was at 71.84 at 5pm, from 72.09 yesterday. The kiwi traded at 92.02 Australian cents up from 91.91 cents, 70.24 yen from 70.83 yen, 56.85 euro cents from 56.77 cents, 51.72 British pence from 52.16 pence, and 4.5302 Chinese yuan from 4.5556 yuan.

Tags: Market Close