Wall Street plunge sends NZ market and dollar spiralling

Global stock markets were awash with red ink overnight – which seeped into NZ’s market today – after US inflation data came in higher than forecast.

Wednesday, September 14th 2022, 5:57PM

by BusinessDesk

Global markets were swift to react to the news and Wall Street fell to its biggest loss since early 2020 as panicked investors rushed to sell off stocks, causing every stock on the Nasdaq 100 and the Dow Jones Composite Average Index to fall.

The annual rate of inflation was lower than the 8.5% reported in July, however, it wasn’t as low as investors had been expecting which was the reason for the large sell-off.

Core inflation rose by 0.6% for an annual increase of 6.3% – compared with 5.9% recorded for July.

The S&P/NZX 50 Index fell 104.1 points, or 0.89%, to 11,658.04. Turnover was $117.5 million.

The benchmark index dropped more than 1% when the market opened this morning and regained just a little ground over the day, with 104 stocks falling into the red and only 31 stocks edging into positive territory.

Nikko Asset Management portfolio manager Stuart Williams said the inflation data had been a shock to markets everywhere.

However, considering how Wall Street had fared, NZ’s market had done alright and hadn’t opened as low as expected.

“The other factor is the NZ market has some nice defensive characteristics in terms of some of our companies that pretty still have a reasonably stable earnings outlook,” he said.

Move Logistics has commissioned a new US$12m (NZ$20m) 'roll-on roll-off' freight vessel to be built at a Vietnamese shipyard as part of its government-funded move into coastal shipping.

The freight and logistics business fell 4% to $1.20 today – on light trading.

Mainfreight was down 2% to $73, and Freightways was up 0.2% to $10.90.

Auckland International Airport was down 1.3% to $7.60. The airport provided a monthly traffic update for July today, which revealed that total passenger volumes increased by 41% in July 2022 compared to July 2021.

Air NZ fell 2.2% to 66 cents.

Automation and robotics company Scott Technology signed an $11.2m deal with NZ meat processor Silver Fern Farms. The investment will involve Scott Technology delivering a fully automated lamb-processing system for the Silver Fern Farms Finegand plant in South Otago.

The company’s shares were down 1.7% to $2.84 by the end of today.

Briscoe Group was up 2.1% to $5.46 after the retailer released its earnings for the six months to July 31. It showed that disrupted supply chains, covid-19 and other economic factors have reduced its first-half net profit by nearly 3.8% to $45.6m.

However, its total sales for the six months to July 31 increased 2.7% to $367.9m, which was 21% ahead of the most recent comparable period not affected by the pandemic.

Fonterra Shareholders' Fund Units were down 1.5% to $3.40 after a few days of the stock climbing.

The NZX announced to the exchange today that it would be closing on Sept 26 to honour Queen Elizabeth II as it will be a national public holiday.

The stock was flat at $1.21 today.

On the currency front

ASB senior economist Mike Jones said the fresh CPI data had set a “cat amongst the financial markets pigeons” overnight.

After the inflation data was released, the NZ dollar dropped from 61.59 US cents to 59.88 cents – a “fresh” 28-month low, Jones said.

He also said that US interest rate markets had moved forward to fully price a 75bps hike from the Federal Reserve next week – with speculation that a larger 100bps move could be on the cards.

Independent treasury adviser Peter Cavanaugh said two things could be learned from the market reaction to new data.

“Markets don’t like surprises and they don’t like getting it wrong,” he told BusinessDesk.

“Both of those things happened within a couple of hours, and you got a very striking reaction from that.”

The kiwi picked up some basis points (bp) over the day but was still significantly down at 60.05 US cents at 5pm in Wellington down from 61.27 cents US cents on Tuesday.

Tags: Market Close