A2 jumps on US FDA deal; Fed hike sends other stocks lower

New Zealand's sharemarket fell on Thursday after the US Federal Reserve raised interest rates, but dairy stocks gained as A2 Milk was given new access to the US market.

Thursday, November 3rd 2022, 6:11PM

by BusinessDesk

The S&P/NZX 50 Index fell 98.48 points, or 0.9%, to 11,184.30. Turnover was $125 million.

A2 Milk shares traded as high as $6.28, and closed up 4.2% at $5.99, after it won FDA approval to sell milk formula products in the United States.

The infant formula exporter applied for market access in May, when the country was experiencing a critical shortage.

Analysts have warned this isn’t an instant win for the company – A2 Milk said it will be ‘incrementally beneficial’ – and the share price reaction likely reflects hope the company will build a better position in the US market.

The US is a much smaller market than China and margins are significantly lower.

Shares in Synlait Milk, which will manufacture the products, rose 2.3% to $3.15.

Elsewhere, NZ shares were following global markets lower after the US Federal Reserve hiked its base interest rates by another 75 basis points.

Many investors had been picking the central banking committee to ‘pivot’ from its path of aggressive rate hikes, but chair Jerome Powell said today this idea was “premature”.

US stocks fell after his press conference – having initially rallied almost 1.5% – and dragged the local market down with it, said Tiger Broker NZ chief executive, Greg Boland.

“The Fed rhetoric of raising rates for longer and perhaps not quite as aggressively in December stymied any bullish sentiment,” he told BusinessDesk.

The local index’s largest stock, Fisher & Paykel Healthcare, dropped 3.5% to $19.35 – as did other heavyweights: Infratil, down 2.9% at $8.48, and Mainfreight, which dropped 2.7% to $72.

Briscoe Group climbed 1.8% to $5.01 off the back of strong third-quarter sales, buoyed by Rebel Sport.

Sporting goods sales jumped by a third to $67.8m, while homeware sales increased 23.2% to $107.7m for the 13-week period to Oct 30. Total sales were $175.5m, up 26.8%.

Precinct Properties shares rose 3.3% to $1.24 after the commercial property developer told shareholders at its annual meeting that it was considering entering the multi-unit residential market.

“We see significant opportunity over time for institutional participation in this market and believe that the current market dynamics support our view,” chief executive Scott Pritchard said.

Shares in Vector rose 0.2% to $4.21. The utility company appears to be moving closer to finalising a deal over its metering business.

The Auckland-based lines company’s chief financial officer, Jason Hollingworth, yesterday registered three new company names: Vector Meterco, NZ Holdco and VM NZ Bidco.

The kiwi dollar was trading at 58.18 US cents at 3pm in Wellington, down slightly from 58.43 cents yesterday. The trade-weighted index was at 70.08, from 70.17 yesterday.

Before Powell’s press conference, the NZ dollar had been moving higher as investors expected a Fed ‘pivot’.

However, his hawkish words sent the US dollar higher, BNZ strategist Jason Wong said in a note this morning.

“NZD crosses are all higher on the day but much of this pre-dated the FOMC announcement, with the NZD seeing broad support following yesterday’s strong NZ labour market data,” he said.

Tags: Market Close