NZ sharemarket gains over 0.5% amid recession news

New Zealand joined rising offshore markets with a gain of more than 0.5% as the United States looked forward to three interest rate cuts this year.

Thursday, March 21st 2024, 6:32PM

by BusinessDesk

The S&P/NZX 50 Index began climbing at lunchtime and closed at 11,915.71, up 83 points or 0.57% after falling to a morning low of 11,781.51.

There were 84 gainers and 48 decliners over the whole market, with 40.38 million shares worth $123.3m changing hands.

The US Federal Reserve held its 23-year high cash rate at 5.25-5.5% and said it planned to cut the rate three times before the end of the year.

The major indices reacted with sharp rises, and all reached closing highs. The Dow Jones Industrial Average increased 1.03% to 39,512.13 points; the S&P 500 gained 0.89% to 5224.62; and the Nasdaq Composite gained 1.25% to 16,369.41.

Across the Tasman, the S&P/ASX 200 Index had risen 1.16% to 7,785.1 points at 6pm NZ time.

The Federal Reserve revised US economic growth to 2.1% this year, up from 1.4%, and unemployment at 4%, down from the 4.1% forecast in December. Inflation is expected to run at 2.4% despite a lift in oil prices.

Recession

Greg Smith, head of retail with Devon Funds Management, said the Federal Reserve has rung the bell on rate cuts.

“While the war on inflation is not over, progress has been made on the battlefront," Smith said. “The Fed is now in a position of accepting that inflation is getting back to the target range over a slightly longer framework, and the central bank is taking a balanced view to engineer a soft economic landing.”

Smith said central banks work in unison, and perhaps the Reserve Bank of NZ (RBNZ), which has been more hawkish than others, will become patient with inflation hitting the target.

“Our economy is slowing down, with weakness in manufacturing and retail, and the Reserve Bank may look at one or two interest rate cuts by the end of the year. That’s what the market was reacting to.”

The local market shrugged off the news that the economy is in a technical recession after gross domestic product (GDP) contracted 0.1% in the December quarter. ANZ Research said the GDP data continued to show that monetary tightening is working to cool the economy.

“GDP growth on a per capita basis is almost as soft as it was following the Global Financial Crisis. It’s tough going out there,” ANZ said.

The bank said it wasn’t “a run-for-the-hills recession that we’ve seen through times of financial market and economic crisis.

“We expect this slowdown to find a floor around mid-2024, at which point the million-dollar question will be whether the slowdown has been enough to return CPI inflation sustainably to target.”

Local market

Fisher and Paykel Healthcare was up 69c or 2.88% to $24.64; Meridian Energy rose 16.5c or 2.87% to $5.92; Ebos Group gained 23c to $36; a2 Milk added 8c to $6.64; and Skellerup added 9c or 2.14% to $4.29.

Sky TV collected 6c or 2.21% to $2.78; Vulcan Steel increased 17c or 1.95% to $8.87; Restaurant Brands was up 12c or 3.58% to $3.47; and The Warehouse gained 4c or 2.74% to $1.50.

Gentrack was up 19c or 2.34% to $8.30; Vista Group gained 4 c or 2.05% to $1.99; Livestock Improvement Corp rose 8c or 7.48% to $1.15; and Blackpearl Group increased 5c or 9.8% to 56c.

Leading banks ANZ increased 60c or 1.95% to $31.35, and Westpac rose 88c or 3.15% to $28.78.

Fonterra Shareholders’ Fund gained 7c or 1.94% to $3.67 after the dairy co-operative reported a 23% increase in half-year net profit to $674m. Fonterra’s earnings per share was 40c and it is paying an interim dividend of 15c a share, up from 10c.

The dairy giant maintained its forecast mid-point payout of $7.80 per kg of milk solids.

Comvita fell a further 10c or 4.55% to $2.10; AFT Pharmaceuticals declined 13c or 4.38% to $2.84; Winton Land shed 9c or 4.11% to $2.10; Green Cross Health was down 4c or 3.7% to $1.04; and NZME decreased 3c or 3.41% to 85c.

Geneva Finance, unchanged at 29c, has been fined $80,000 for breaching the NZX corporate governance code on the size and make-up of the board. Geneva didn’t have enough independent directors between July 31 and Sept 7 last year.

Tags: Market Close