NZ sharemarket falls due to global inflation fears

The New Zealand sharemarket followed sharp falls offshore on fresh investor concerns that the sticky inflation will delay interest rate cuts.

Wednesday, May 1st 2024, 6:36PM

by BusinessDesk

The S&P/NZX 50 Index fell at the opening and then maintained a steady momentum to close at 11,867.58, down 89.92 points or 0.75%.

There were 98 decliners and 34 gainers on the main board, with 27.67 million shares worth $87.94m changing hands.

Matt Goodson, managing director of Salt Funds Management, said the markets are faced with the ongoing theme of inflationary pressures being slow to subside and interest rates staying higher for longer, impacting the value of equities.

He said the US Federal Reserve was meeting overnight, and there were concerns that a rate cut there might not happen this year.

The US employment cost index, a measure of wages and benefits, increased by 1.2% in the March quarter, above economists’ estimate of 1%.

The Dow Jones Industrial Average declined 1.49% to 37,815.92 points and is down 5% in April – its worst monthly performance since September 2022.

The S&P 500 shed 1.57% to 5,035.69 points (down 4.2% in April), and the Nasdaq Composite slumped 2.04% to 15,657.82 (down 4.4%).

Across the Tasman, the S&P/ASX 200 Index had fallen 1.1% to 7,579.5 points at 6pm NZ time.

At home, the first quarter labour market data was weaker than expected, with unemployment rising to a three-year high of 4.3%, up from 4% in the previous quarter and ahead of the 4.2% forecast.

Goodson said unemployment could have been higher if the participation rate had not fallen 40 basis points. The labour cost index increased 0.8% in the quarter and 3.8% year-on-year.

Private sector wages were up 3.8% and public 5.5%, with average hourly earnings increasing 4.8% year-on-year – the peak was 8.6% in 2022.

Goodson said they are still big numbers, but wage inflation is starting to come back, which is critical for the Reserve Bank.

“The Business Outlook survey showed depressed economic conditions, and people are pretty grumpy out there. We see a rate cut by the Reserve Bank in November.”

On the NZ market

Fisher and Paykel Healthcare eased 26c to $28.21; a2 Milk was down 12c or 1.79% to $6.57; Fletcher Building declined 9c or 2.36% to $3.72; Skellerup decreased 8c or 1.78% to $4.42; and Serko gave up half of its gain the day before, falling 29c or 7.8% to $3.43.

Goodson said Serko had a relief rally, but investors took a second look at the agreement with Booking.com and found a sharp price abatement (to Serko) when bookings reached a certain threshold.

Summerset shed 27c or 2.43% to $10.83; Comvita was down 6c or 2.91% to $2; Manawa Energy declined 12c or 2.75% to $4.24; Delegat Group decreased 20c or 3.03% to $6.40; Scott Technology eased 6c or 2.39%to $2.45; and Sky TV was down 7c or 2.41%to $2.84.

Retailers KMD Brands declined 3c or 5.56% to 51c; Michael Hill also shed 3c or 4.05% to 71c, and Hallenstein Glasson was down 8c to $5.96.

The property sector was weaker. Argosy declined 3c or 2.67% to $1.095; Investore also decreased 3c or 2,65% to $1.10; Goodman Trust fell 7c or 3.07% to $2.21; and Vital Healthcare Trust eased 5.5c or 2.52% to $2.13.

Restaurant Brands, gaining 12c or 5.335 to $3.52, reported total sales increased 7.9% to $333m for the three months ending March compared with the previous corresponding period.

New Zealand sales were up 15.2% to $149m, Australia 1.4% to A$68.9m (NZ$73.9m), Hawaii 5.6% to US$41.1m (NZ$67.1m), and California was down 4.25 to US$26.3m.

Steel & Tube increased 3c or 2.94$ to $1.05 after announcing the $700,000 purchase of 20 owned and leased trucks and eight owned trailers from Roadex Logistics, which transports steel. Steel & Tube’s staff will grow with 20 Roadex drivers.

Sanford increased 9c or 2.25% to $4.09 after telling the market it has appointed one of its directors and former Skellerup boss David Mair as its new chief executive.

Other gainers were Freightways, collecting 10c to $8.50; Allied Farmers, up 4c or 5.33% to 79c; NZ Oil & Gas, increasing 3.5c or 8.14% to 46.5c; and Ventia Services, adding 6c to $4.05.

Tags: Market Close