NZ shares falter as US economy charges forward

New Zealand's headline share index fell on Wednesday following a decline on Wall Street after data showed the US services sector continued to grow during August despite higher interest rates.

Wednesday, September 7th 2022, 6:10PM

by BusinessDesk

The S&P/NZX 50 Index fell 50.1 points, or 0.4%, to 11,548.30. Turnover was $136 million.

BNZ strategist Nick Smyth said there had been another sell-off of global bonds overnight as the market reacted to US ISM Services index data being stronger than expected.

This prompted investors to predict the US Federal Reserve will hike interest rates by 75 basis points as it attempts to slow down the economy to halt inflation.

Market pricing for a big rate hike faded after weaker employment data was released last Friday but has swung back after the strong services data showed no sign of recession.

Smyth said traders had priced in an 80% chance of a 75bps hike and ultimately a terminal rate of roughly 4%.

Selling bonds ultimately pushes the yield, or interest rate, on the bond higher and lowers the valuation of listed companies.

“Wall Street started the first trading day on a back foot as bond yields spiked amid strong US service PMI data, which strengthens the odds for more aggressive rate hikes,” CMC analyst, Tina Teng said.

Teng said stock prices may struggle as too much of the US economy was doing well which increases the likelihood of an “extended period of rising interest rates”.

SkyCity Entertainment led the local market lower, falling 3.2% to $2.74, followed by cinema software company Vista Group which dropped 2.9% to $1.68.

Shares in Restaurant Brands NZ fell 2% to $8.05 after it announced two long-serving executives would resign next year.

The chief executive officer, Russel Creedy, and chief financial officer, Grant Ellis, said they will step down in March and May, although they will remain as advisors to their replacements.

Kiwi Property Group shares declined 1% to $1.02. The investment company today agreed to sell Northlands Shopping Centre and 43 Langdons Road in Christchurch to Mackersy Property for $160 million.

The final sale price represents a property level internal rate of return of 10.9% since inception, it said in a statement to the NZX.

Kiwi Property will continue to manage Northlands on Mackersy’s behalf and has also agreed to provide vendor finance of up to $75m to settle the purchase if required.

Meanwhile, Argosy Property climbed 1.9% to $1.31 – the day’s biggest gain – followed by Property for Industry which was up 1.8% at $2.585.

The NZ dollar was trading at 60.15 US cents at 3pm in Wellington, down from 61.24 cents yesterday.

Smyth said weakness in the Chinese currency had been weighing on the Kiwi and Aussie dollars.

The kiwi traded at 89.58 Australian cents from 89.71 and 4.19 Chinese yuan from 4.24 yuan. The trade-weighted index was at 70.24, from 70.95 yesterday.

Tags: Market Close