Markets buoyed by Russia/Ukraine peace talks

New Zealand's headline share index climbed in unison with US markets after the Federal Reserve delivered a widely expected interest rate hike and peace talks between Russia and Ukraine made progress.

Thursday, March 17th 2022, 7:01PM

by BusinessDesk

The S&P/NZX 50 Index rose 125 points, or 1%, to 11,998.96. Turnover was $213 million.

The US Federal Reserve lifted cash rates for the first time since 2018, boosting them just 25-basis points overnight, as widely expected by the market.

The central bank governors predicted US cash rates to be near 2% by the end of the year, likely meaning six more hikes before Christmas.

Michael McCarthy, chief strategy officer at Tiger Brokers Australia, said the reason US markets rallied was news of a realistic peace plan forming between Russia and Ukraine.

“The thrust of the proposed agreement is that Russia will cease its attacks and withdraw its troops if Ukraine gives up its NATO ambitions,” he said.

President Zelensky has signalled he is willing to remain a neutral country that doesn’t host any foreign military bases but won’t surrender territory seized by Russia.

The possibility of Russia withdrawing from Ukraine saw investors “dive back into share markets,” McCarthy said.

Also helping was a surprisingly strong NZ gross domestic product number released this morning, which showed the economy growing 3% in the December quarter.

Higher risk stocks were some of the market leaders today as investors returned to heavily sold companies.

Vista Group surged more than 8%, on light volume, to $1.85 and A2 Milk jumped 3% to $5.69 – which also dragged Synlait up 2.2% to $3.22.

Dairy co-operative Fonterra reported a 7% drop in its first-half net profit but retained its full-year guidance despite the record milk price. Units in the Shareholders Fund fell 2% to $3.40.

Mark Lister, head of private wealth research at Craigs Investment Partners, said the share price reaction had been "pretty muted" after today's results announcement.
"It looked like the result was pretty much as people expected it to be," he said.

Australian media reported Air New Zealand has tapped UBS, Citi and Forsyth Barr to run its $1 billion capital raise in the coming weeks.

Shares in the airline climbed 1.4% to $1.43 today, despite analysts all agreeing the stock is significantly overvalued and could fall as much as 40%.

However, a heavily discounted equity raise could offer an attractive entry point for investors wanting to benefit from the reopening of NZ to the world.

Auckland International Airport gained 4% at $7.485 today, while Serko climbed 2% to $4.63.

SkyCity Entertainment Group, which is also considered a reopening stock, climbed 1% to $2.94 and Millennium & Copthorne Hotels was up 2.2% at $2.29.

Stock market operator NZX dropped 0.7% to $1.37 having recently finished its capital raise, leaving its underwriter with a significant portion of the shares on offer after the market price dropped below the offer price.

Contact Energy had the day’s largest decline, falling 2.5% to $7.77.

The NZ dollar leapt against its American counterpart, boosted by the improved risk sentiment and strong local economic data.

It was trading at 68.43 US cents at US3pm in Wellington, up an entire cent from 67.43 cents yesterday.

Tags: Market Close