US rating downgrade rattles fragile investors and NZX50 dips

The New Zealand sharemarket was down slightly as the United States credit rating downgrade reverberated around weaker offshore bourses.

Thursday, August 3rd 2023, 6:36PM

by BusinessDesk

The S&P/NZX 50 Index followed the same pattern as the day before, down in the morning and recovering in the afternoon, to close at 11,936.62 and declining 25.41 points or 0.21%. The index reached an intraday low of 11,884.2 points.

There was fragility, with 39 gainers and 90 decliners over the whole market, with 33.48 million shares worth $111.4m changing hands.

Mark Lister, investment director with Craigs Investment Partners, said the local market held its own reasonably well despite a sharp fall in the US. “We haven’t had the same stunning rally that they have had.

“Our market is in a reasonably good place. There’s been an uptick in unemployment, the labour shortage is starting to ease, and wage pressures are coming off. Maybe, we won’t see any more interest rate rises.

“It’s certainly not all bad. The (latest) dairy auction was ugly, and farmgate milk payments are likely to be lowered.

The Kiwi dollar will remain under pressure, and this leaves the general election standing out as the key area of uncertainty,” said Lister.

The NZ dollar has weakened to US60.72c against the American greenback after sitting above US64c in mid-July. The Fitch downgrade of the US credit rating from AAA to AA+ sent the US markets reeling.

The Dow Jones Industrial Average was down 0.98% to 35,282.52 points; S&P 500 declined 1.38% to 4513.39; and Nasdaq Composite fell 2.17% to 13,973.45, its worst trading day since February.

The US last had a downgrade from a major ratings agency in 2011, with Standard and Poor’s making the same move as Fitch.

The London FTSE 100 Index was down 1.36% to 7561.63 points, and the Japan Nikkei 225 had fallen 1.61% to 32,182.36 at 6pm NZ time. The S&P/ASX 200 Index was down 0.67% to 7305.4 points.

Lister said the US markets were due a breather – the S&P 500 has risen more than 17% this year.

“The rally has been driven by the technology stocks, and the markets will be tested again overnight when Apple, up 48% this year, and Amazon, up 52%, report their second-quarter earnings. Whatever the outcome, the stocks will have an impact.”

Back in NZ

At home, Fisher and Paykel Healthcare was down 12c to $24.51; Freightways declined 17c or 1.93% to $8.62; Port of Tauranga shed 7c to $6.08; Summerset Group gave up 11c to $10; Synlait Milk decreased 4c or 2.44% to $1.60; and Hallenstein Glasson was down 11c to $6.20.

Contact Energy, unchanged at $8.36, announced that up to $114m development costs have been approved to advance the 180MW Te Mihi geothermal power station near Taupo. A final investment decision is expected early next year.

The development costs include consenting, front-end engineering design, drilling and well pad preparation. Te Mihi will replace the 1950s-built Wairakei A and B power stations, which will be decommissioned and the new station coming online in the second half of 2026.

Fellow energy stocks Meridian was up 8c to $5.60, and Mercury was down 6c to $6.47.

Leading banks ANZ was down 70c or 2.53% to $26.95, and Westpac declined 45c or 1.89 to $23.40.

Other decliners were Smartpay Holdings falling 8c or 4.57% to $1.67; Ventia Services down 12c or 3.76% to $3.15; Gentrack decreasing 14c or 3.12% to $4.35; and Carbon Fund shedding 6c or 3.39% to $1.71.

Seeka fell 11c or 4.12% to $2.56; Restaurant Brands declined 22c or 3.42% to $6.21; Winton Land shed 5c or 1.92% to $2.55; Vulcan Steel was down 30c or 3.61% to $8; and Rakon decreased 3c or 3.75% to 77c.

Amongst the gainers, Investore rebounded 4c or 2.84% to $1.45; Bremworth rose 3c or 6.67% to 48c; Foley Wines increased 4c or 3.2% to $1.29; CDL Investments collected 3c or 4.05% to 77c; Just Life was up 1.5c or 4.76% to 33c; and Savor improved 2c or 6.06% to 35c.

Good Spirits Hospitality, unchanged at 2.4c, told the market it would ask its financier Pacific Dawn to permit a distribution to shareholders following the $20.7m sale of its nine bars and restaurants to Brew on Quay. Good Spirits said the proceeds from the sale would be insufficient to repay Pacific Dawn in full.

Software firm Blackpearl Group increased 6c or 12.24% to 55c after reporting new annual recurring revenue of more than $1m for its new SaaS product Pearl Diver over the three months ending July.

Radius Residential Care, up 0.001c to 20c, told shareholders at the annual meeting that first-quarter operating earnings (Ebitda) were significantly ahead of the same last year, and this trend would continue.

Radius said it has bank approval to implement a debt management programme, including selling some non-core assets to reduce debt. Radius operates 24 care homes and 1,880 beds and four retirement villages with 148 units.

Tags: Market Close