a2 and Mainfreight fall as investors eye inflation

New Zealand’s benchmark index slid almost 50 points with investors focused on macro-economic conditions and the risk of runaway inflation.

Thursday, June 10th 2021, 6:17PM

by BusinessDesk

The S&P/NZX 50 Index fell 48.49 points, or 0.4%, to 12,518.01. Within the index, 32 stocks fell, 16 rose and two were unchanged. Turnover was $278 million.

Vista Group International led the market lower, falling 3.4% to $2.25 after jumping 5% yesterday on light volume.

Other significant decliners were a2 Milk which fell 2.9% at $5.97 (see graph).

Mainfreight which shed 2.3% to $75.30 after chairman Bruce Plested sold $75 million in shares to expand his Waiheke property.

(Report continues below)

The share sale was disclosed to the NZX today and indicated one million shares, and Meridian Energy down 1.3% at $5.33.

Serko had the day’s biggest gain, climbing 4.2% to $7.40, followed by Napier Port which rose 3.6% to $3.42 after an investor presentation.

SkyCity Entertainment rose 2.9% to $3.55, as it recovered from a steep drop yesterday.

“Right now, the market is very macro driven, with interest rates and inflation being the main focus,” said Brad Gordon, an investment adviser at Hobson Wealth Partners.

Overnight, United States 10-year bond yields broke below 1.5% for the first time since early March. This is a significant move ahead of an important US inflation indicator which will be released overnight.

The drop in rates is a sign investors’ fear of inflation is subsiding, as central banks are playing down current inflation pressures as being a temporary effect.

“It suggests the market is becoming convinced inflation is transitory,” Gordon said.

The US consumer price index is expected to be at 4.7% year on year, well above the Federal Reserve’s target at 2%, with core inflation expected to lift to 3.5%, when released on Thursday night.

Gordon said while lower rates were generally supportive for equity market valuations, higher rates were indicative of growing economic activity in general.

“Markets tend to grind their way through these cycles,” he told BusinessDesk.

Precinct Properties was up 0.9% at $1.62 after a preliminary full year revaluation added $284 million to its portfolio.

The NZ dollar underperformed again overnight with no obvious reason. The kiwi dollar was trading at 71.78 US cents at 3pm in Wellington, down from 72.03 cents yesterday.

OFX said investors appeared reluctant to extending any kiwi rally ahead of tonight’s “all-important US CPI print”.

The trade-weighted index was at 74.51 at 3pm, from 74.76 yesterday. The kiwi traded at 92.84 Australian cents from 93.04 cents, 78.62 yen from 78.82 yen, 58.98 euro cents from 59.13 cents, 50.84 British pence from 50.86 pence, and 4.5831 Chinese yuan from 4.6080 yuan.

Tags: Market Close