Inflation hacks share prices

New Zealand's main share index finished the week down almost 3% as inflation hit a 40 year high in the US, all but guaranteeing the Federal Reserve will hike interest rates next week.

Friday, March 11th 2022, 6:25PM

by BusinessDesk

The S&P/NZX 50 Index today fell 104 points, or 0.9%, to 11,821.25. Turnover was $210 million.

Inflation data for February showed prices in the United States had climbed almost 8%, coming in slightly higher than expectations.

ASB Bank economist Mike Jones said the “frightening number” was taken before the Russian invasion of Ukraine and the consequent spike in oil prices.

“It is almost certain we’ll see a fresh high somewhere in the ‘8s’ from the March data,” he said.

“Interest rate markets remain fully priced for the Federal Reserve to begin tightening policy later this month with a 25-basis-point rate rise”.

Mark Smith, also an ASB economist, said NZ’s annual inflation rate was expected to peak at 7.5% in the June quarter – thanks in part to higher fuel prices.

New Zealanders around the country were queuing at petrol stations – jerry cans in hand – after Waitomo Group warned pump prices would be hiked 20 cents at 6pm.

Smith said inflation would not return to its target range until 2024.

“Risks are tilted towards high inflation being more ingrained, which will clearly trouble the Reserve Bank of NZ,” he said.

The local sharemarket fell under the pressure of inflation and higher interest rates, with NZ government bond yields all at fresh highs today.

Eroad, Heartland Group, and Pacific Edge were the biggest losers today, all falling more than 3% to $3.72, $2.07 and 90 cents, respectively.

Tourism Holdings fell 2.8% to $2.46 after the Commerce Commission made a statement outlining its concerns about the planned acquisition of Apollo Tourism.

While the commission hasn’t spiked the deal, the statement had an unfavourable tone and flagged a number of issues – lowering the likelihood the deal will be permitted.

Mainfreight shares fell 3% to $76. The logistics company yesterday suspended its services in Russia and Ukraine. It employs about 50 staff across the two regions.

Even NZ Oil & Gas couldn’t hold onto its gains headed into the weekend and fell 2.6% to 55.5 cents, after a few strong days. Carbon Fund units recovered another 3% to $2.15.

Turners Automotive Group was up 1.8% at $4.07 after it hiked its profit guidance by $1m to between $42m and $43m. NZ Automotive Investments also benefited, climbing 3.5% to 90 cents per share.

The government today announced changes to the troublesome CCCFA lending rules which have been hitting the headlines and sucking buyers out of the housing market.

One senior broker said the overly restrictive rules had been causing concern about house prices and caused some investors to sell their stakes in retirement village operators.

The newly loosened rules may encourage some to re-deploy capital into aged-care stocks with greater confidence in the housing market.

The sector had a mixed performance today, but Ryman Healthcare climbed half a percent to $9.50.

The NZ dollar was trading 68.61 US cents at 3pm in Wellington, up from 68.27 cents yesterday.

Tags: Market Close