Shares rise as markets ignore ‘shocking’ inflation

New Zealand shares and dollar moved higher as investors were unfazed by annual inflation in the United States hitting 5% in a data release overnight.

Friday, June 11th 2021, 7:01PM

by BusinessDesk

The S&P/NZX 50 Index rose 32.38 points, or 0.3%, to 12,550.39. Within the index, 22 stocks fell, 22 rose and six were unchanged. Turnover was $163.8 million.

BNZ interest rate strategist, Jason Wong said the market was “unperturbed by the shockingly high” consumer price index with the S&P 500 moving higher and market interest rates falling.

The domestic rates market followed the global trend. The yield on a 10-year government bond fell to 1.69%, down roughly 20bps over the past two weeks.

“The market is increasingly backing the Fed’s view that high inflation will prove transitory and therefore will be very slow to remove the current level of policy stimulus,” Wong said.

This could be risky as the economy no longer needs emergency-level support and could overheat. Markets will now focus on the US Federal Reserve’s policy update next week, he said.

Skellerup Holdings led the local stock market higher, climbing 3.3% to $4.70 – now up 27.7% year-to-date. The index’s biggest stock, Fisher & Paykel Healthcare, was up 2.1% at $29.92.

A2 Milk continued to trend higher, today gaining 2.7% at $6.13. Its key supplier Synlait Milk has fared better but dropped 4.3% to $3.36 today.

Napier Port climbed 2.6% to $3.51 despite Forsyth Barr analysts saying the stock was expensive and reiterating their ‘underperform’ rating.

At its recent investor day, the port operator gave an 'aspirational' earnings growth target for the 2025 financial year of roughly $61.5 million, or more than 50% above 2020’s $41m.

SkyCity Entertainment gave earnings guidance for the first time this year, saying it expects normalised net profit and earnings for the 12 months to June 30 to be higher than the prior year.

The casino operator’s share price climbed 1.4% to $3.60, having taken a hammering last week when Australian regulators launched a money laundering probe into its Adelaide venue.

The New Zealand dollar responded positively to the high inflation pressure in the US, with traders pushing the currency marginally higher on optimism of economies reopening.

The kiwi dollar was trading at 71.94 US cents at 3pm in Wellington, up from 71.78 cents yesterday.

“Having priced in another outperformance, markets looked to fundamentals behind the headline number, identifying areas specific to the reopening of the economy as a key driver in pushing up prices,” OFX said in a note.

The trade-weighted index was at 74.59 at 3pm, from 74.51 yesterday. The kiwi traded at 92.78 Australian cents from 92.84 cents, 78.69 yen from 78.62 yen, 59.03 euro cents from 58.98 cents, 50.75 British pence from 50.84 pence, and 4.5942 Chinese yuan from 4.5831 yuan.

Tags: Market Close