Markets waits on US Fed...

New Zealand shares declined as investors waited for the US Federal Reserve to wrap up policy meetings overnight and give a press conference Thursday morning (NZ time).

Wednesday, June 16th 2021, 6:43PM

by BusinessDesk

The S&P/NZX 50 Index fell 114.79 points, or 0.9%, to 12,581.6. Within the index, 15 stocks fell, 29 rose and six were unchanged. Turnover was $164 million.

Markets traded with a cautious tone with investors holding out for any signs the US central bank would look to tighten generous monetary policy settings that have unpinned high equity prices

Interest rate strategist at BNZ Nick Smyth said there was a particular focus on the bank's interest rate projections and any talk of tapering its bond buying programme.

BNZ Bank revised its own inflation predictions, now picking headline inflation to breach the Reserve Bank of New Zealand’s 1-to-3% target range in the final quarter of this year.

“We think the risk of inflation settling higher is rising, with measures of inflation expectations already pushing higher,” he said in a note.

Should inflation run ahead of the target for an extended period of time, the central bank will be forced to raise interest rates faster than previously indicated.

Traders do not seem overly concerned about this possibly, with market interest rates declining slightly across the past ten days.

Tourism Holdings led the NZX 50 lower, falling 3.1% to $2.47 on light volume. Chorus shares and Fonterra Shareholders’ Fund units both dropped 3% to $6.265 and $3.88, respectively.

Stocks that drove the market higher yesterday fell back today. A2 Milk declined 2.3% to $6.41, and Fisher & Paykel Healthcare slipped 0.9% to $30.48.

Agri-business Scales saw the opposite movement, bouncing 2.1% to $4.85, as investors shook off the initial disappointment of it withdrawing from takeover talks with Villa Maria.

Outside of the index, utilities software firm Gentrack declined 3.3% to $2.08 after it gave a presentation to investors outlining a new three-year strategy.

The company has a new brand and chief executive but warned it still faces the same difficulties in the UK market where its customers have been rocked by insolvencies.

The upcoming NZX 50 quarterly review will bring no changes to the stocks that make up the index with Sky TV, with a market capitalisation of $295m, remaining above the automatic exclusion level of $279m.

Forsyth Barr analysts said fleet management firm Eroad, with a market value of $400m, would be next in line should a stock be relegated out of the index.

The Warehouse Group has also jumped the ranks, now in second place for inclusion in the index, after Foodstuffs sold a large stake which has increased the stock’s liquidity.

In currency markets, the New Zealand dollar was virtually unchanged as it teetered on a key support level around 71.30 US cents, said ASB economist Mike Jones.

“This level has been tested four times since April and held, so the next few sessions could be interesting. It’s really all down to the what the Fed does tomorrow morning,” he said in a note.

The kiwi dollar was trading at 71.34 US cents at 3pm in Wellington, down from 71.35 cents yesterday.

The trade-weighted index was at 74.27 at 3pm, from 74.26 yesterday. The kiwi traded at 92.75 Australian cents from 92.69 cents, 78.55 yen from 78.57 yen, 58.85 euro cents from 58.87 cents, 50.67 British pence from 50.60 pence, and 4.5685 Chinese yuan from 4.5712 yuan.

Tags: Market Close