NZ shares up as Fed meeting looms

New Zealand's main share index edged higher as tomorrow’s Federal Reserve meeting and local inflation data release loomed over the market.

Wednesday, January 26th 2022, 7:19PM

by BusinessDesk

The S&P/NZX 50 Index rose 57 points, or 0.5%, to 12,185.65. Turnover was $120 million.

Some of the stocks worst affected by the recent sell-off began to recover. Vista Group recouped 3.5% to $2.10, and Sky Network Television rose 2.6% to $2.40.

Pacific Edge rose 2.7% to $1.16 and Kathmandu Holdings climbed 2.3% to $1.36 – all are considered higher risk stocks and have fallen this year.

Much of the market’s anxiety has come from US investors who have begun to worry the US Federal Reserve will hike interest rates much faster than previously imagined.

The members of the policy committee have been in a two-day meeting to make decisions about future monetary settings and will issue a statement at 8am Thursday, NZ time.

ASB strategist Nathaniel Keall said there wasn’t much doubt the US central bank will have to tighten its monetary policy, but investors were asking by ‘how much’.

The most likely outcome is the Federal Reserve will stop buying bonds and signal its first rate hike in March, although: “The risks here are tilted to a more hawkish turn,” Keall said.

Meanwhile, the markets are grappling with how much they are willing to pay for high priced growth stocks now that interest rates are set to return to more normal levels.

“The battle between the bulls and the bears continues, with market valuations still stretched on historical measures after a liquidity-fuelled bull market for equities and as we head into a more difficult macro environment,” said BNZ strategist, Jason Wong.

NZ’s local interest rates will also get a test tomorrow when the consumer price index data is released, offering a new reading of local inflation levels.

The annual rate is expected to hit 6% and economists think the omicron outbreak will only add to the inflationary pressure.

Local bond yields were higher across the curve today, with most rates at, or near, multi-year highs.

Stock market operator, NZX, climbed 2.9% to $1.77. Its fund management subsidiary Smartshares was today given regulatory approval to offer its products to retail investors across Asia.

Air New Zealand was up 1.1% at $1.42 after naming former aviation executive Alexandria Marren as its new chief operating officer, replacing Carrie Hurihanganui who is the new boss of Auckland Airport.

A2 Milk Company, which was boosted by takeover rumours yesterday, fell back 2.4% to $5.65, with its supplier Synlait Milk following suit – down 2.4% at $3.20.

Rakon had the largest fall on the market, dropping 56% to $1.70.

The NZ dollar was trading at 66.82 US cents at 3pm in Wellington, down from 66.93 cents yesterday.

Tags: Market Close