Pumping oil prices stall market

New Zealand shares were mixed on Tuesday ahead of an interest rate hike in the United States tomorrow and as oil prices dropped.

Tuesday, March 15th 2022, 7:00PM

by BusinessDesk

The S&P/NZX 50 Index fell 4 points, essentially 0%, to 11,801.73. Turnover was reasonable at $185 million.

Technology and energy stocks were weaker in US markets overnight as bond yields climbed and oil prices plunged.

Oil prices dropped around 7% to trade near US$100 a barrel, down almost 30% from a week ago at the peak of the panic.

Investors were watching ceasefire talks between Russia and Ukraine, while waiting for the Federal Reserve to conclude a meeting deciding where to set its interest rates.

Michael McCarthy, chief strategy officer at Tiger Brokers Australia, said the question for traders was not whether rates would be increased, but by how much.

“Having successfully prepared the market for an increase, could the Fed jam through a ‘shock and awe’ 0.5% increase to snap inflation fears,” he asked.

McCarthy said it looked like investors were preparing for the larger hike, with higher risk technology stocks on the Nasdaq performing poorly, while the safer Dow Jones index held flat.

Local bond yields tracked US ones higher. The yield on a five-year NZ government bond broke above 3% for the first time in almost seven years.

These higher rates have been dragging market valuations down, and the average NZ stock trades at about 25 times earnings. While this is still high, the average had previously been above 30 times earnings.

Pushpay is one stock that has been badly affected by the climbing interest rates and lost 30% of its market value in the first two months of 2022.

However, it bounced almost 8% to $1.10 today after it tightened its underlying earnings guidance to be between US$61.5m and US$63.5m –– cutting US$1.5m off each end of the range.

Tourism Holdings was up 5.8% at $2.74 with the Prime Minister expected to fast-track the border reopening tomorrow.

Auckland International Airport also climbed 1.3% to $7.28 but Air New Zealand fell 2% to $1.38.

Fisher & Paykel Healthcare was up half a percent at $27 today but is down 18% year-to-date.

Devon Funds portfolio manager, Tama Willis said with US hospitalisation rates from covid trending downward, the earnings boost the stock has received might be tailing off.

Mainfreight also got a 1.3% bounce to $77 today, but is down a similar amount since the start of 2022.

Stock market operator, NZX went back into a trading halt today at $1.38 as it offered unclaimed shares – leftover from its capital raise – in a retail bookbuild.

The capital raise has been caught out by falling valuations and NZX’s on market price is now trading below the offer price of $1.42.

Just 34% of retail investors took up their entitlement, while 68% of institutional shareholders bought their share.

The NZ dollar dropped to 67.40 US cents today, from 68.03 cents, as the prospect of rate hikes in the US boosted the American currency.

Tags: Market Close