Global central banks keep rates low

New Zealand shares rose with overseas markets after both the US Federal Reserve and the Bank of England held interest rates low.

Friday, November 5th 2021, 6:24PM

by BusinessDesk

The S&P/NZX 50 Index rose 130.67 points, or 1%, to 13074.61. Turnover was $220 million.

Mark Smith, a senior economist at ASB Bank, said markets “breathed a collective sigh of relief” when the US Federal Reserve signalled it was in no hurry to hike interest rates.

“This provided a boost to global equities, with the MSCI global equity gauge hitting a record high after the decision and with gains in US and European stocks overnight,” he said.

Encouragement also came from the Bank of England, which made a shock decision to not raise interest rates as investors had expected, BNZ rate strategist Nick Smyth said.

“UK rates fell as much as 20 basis points and the British pound slumped 1.4%, with the decision reverberating to other bond markets,” he said.

Finally, the Reserve Bank of Australia boosted its forecast for gross domestic product growth to be 5.5% in 2022, more than a percentage point increase from the 4% previously predicted.

All this spelt good news for NZ equities which experienced a broad and strong rally across sectors.

Port of Tauranga led the market higher, climbing 3.7% to $6.75, followed by Mainfreight Limited which rose 3.4% to $89.70.

Mainfreight is expected to report a strong interim result next Thursday, driven by “the global freight super-cycle and supported by market share gains,” according to Forsyth Barr.

An analyst note said the stock was benefiting from significant increases in sea freight costs which it can pass on to customers at higher margins.

“We expect over-earning to remain a feature over the next several years, albeit to a lessening extent as congestion in the global freight market gradually improves,” they said.

Z Energy declined 0.5% to $3.59 in an unusual decline as the share price has been anchored by Ampol’s takeover offer in recent sessions.

Analysts were unimpressed by its recent earnings result, describing it as "less worse" with covid still impacting sales.

Some fund managers have said they will sell their stake in Z Energy in order to reinvest capital elsewhere, rather than wait for the takeover deal to jump through regulatory hoops.

Forsyth Barr analysts said it was “still early days in the takeover process” and the timing would depend on how the Commerce Commission reacted to Ampol’s offer to sell Gull.

Fisher & Paykel Healthcare was up 2.1% at $32.46 and A2 Milk rose 2% to $6.67.

Briscoe Group dropped 1.9% to $6.74 after it reported a 14% drop in third-quarter sales due to the latest covid lockdown. It still expects to achieve its profit guidance of more than $73 million.

Hallenstein Glasson Holdings shares also fell, down 1% to $6.93.

The NZ dollar was trading at 71.05 US cents at 3pm in Wellington, down from 71.67 cents yesterday after the Bank of England’s decision to leave interest rates unchanged saw traders buy low-risk currencies.

It was up against the British pound – trading at 52.64 pence from 52.27 – which slumped after the decision.

Tags: Market Close