NZ sharemarket rises on RBNZ's dovish stance

Reserve Bank governor Adrian Orr produced his latest one-liner: “Don’t fret inflation, it’s going away.” The New Zealand sharemarket certainly didn’t fret.

Wednesday, July 10th 2024, 6:34PM

by BusinessDesk

The S&P/NZX 50 Index turned around after the central bank held the official cash rate (OCR) at 5.5% for the eighth successive time and hinted at a loosening in monetary policy.

The index closed at 11,943.332, up 95.2 points or 0.8% for the second day running, after reaching a morning low of 11,789.28. The index is now ahead 1.45% for the year.

There were 81 gainers and 49 decliners on the main board with 29.56 million shares worth $109.69m changing hands.

The Reserve Bank said in its review that restrictive monetary policy had significantly reduced consumer price inflation and interest rates no longer needed to remain restrictive for a sustained period.

ANZ Research said the bank clearly acknowledged the weaker tone of recent economic indicator data and the risks of tight monetary policy on domestic demand. The review tilted towards the first OCR cut in November rather than February.

“But the data will decide,” ANZ said. “Next week’s consumer price index data was always going to be more important for the OCR outlook than whatever the Reserve Bank had to say today.”

Jeremy Sullivan, investment adviser with Hamilton Hindin Greene, said the Reserve Bank had been steadfast in its fight against inflation and was winning faster than it expected.

He said the market was pricing in two rate cuts by the end of the year. “The Reserve Bank put its foot on the throat of the economy and now it’s time to come up for some air.

The bond and share markets and currency all reacted to today’s statement.

“Investors will be pleased there is light at the end of the tunnel (for lower interest rates) and the Reserve Bank is able to change its view on the world based on data.”

The NZ 10 Year Government Bond yield was down 4.8 basis points to 4.599% and the two-year swap declined 460 basis points.

The NZ dollar weakened against the American greenback and Australian, trading at US60.88c from an intraday high of US61.33c and A90.1c compared with A90.9c earlier in the day.

On the local market

Heavyweights Fisher and Paykel Healthcare and Mainfreight, both global stocks, rose $1.15 or 3.82% to $31.25 and $2 or 2.86% to $72 respectively on the back of the weaker NZ dollar.

Contact Energy fell 33c or 3.77% to $8.43 following its update earlier this week which left investors unimpressed.

Mercury Energy was up 8c to $6.72; Freightways collected 14c or 1.82% to $7.83; Auckland International Airport gained 7c to $7.71; Skellerup rose 18c or 4.48% to $4.20; and Chorus added 10.5c to $7.815.

Retirement village operators Summerset Group and Ryman Healthcare, which will benefit from lower interest rates, were up 20c or 2.13% to $9.60 and 9c or 2.54% to $3.64 respectively.

Arvida Group was up 2c or 2.22% to 92c, and Oceania Healthcare was down 1c or 1.89% to 52c. ANZ Bank was up 73c or 2.28% to $32.74; Millennium & Copthorne Hotels NZ increased 7c or 4.02% to $1.81; Restaurant Brands collected 11c or 4.23% to $2.71; Scales Corp gained 14c or 4.19% to $3.48; Scott Technology rose 16c or 7.27% to $2.36; and Sky TV added 6c or 2.41% to $2.55.

Ventia Services climbed 20c or 4.64% to a new high of $4.51; My Food Bag was up 0.006c or 4.44% to 14.1c; Green Cross Health improved 2c or 2.5% to 82c; Radius Residential Care improved 1c or 5.26% to 20c; and Carbon Fund gained 5c or 3.65% to $1.42.

PGG Wrightson continued its rebound, gaining 11c or 5.09% to $2.27 after sitting at $1.45 three weeks ago. Gentrack was down 20c or 1.83% to $10.75; Port of Tauranga eased 8c to $5.20; The Warehouse declined 2c or 2.06% to 95c; Eroad shed 4c or 3.23% to $1.20; and NZME was down 2c or 2% to 98c.

Other decliners were TradeWindow shedding 0.007c or 4.38% to 15.3c; Solution Dynamics decreasing 3c or 2.38% to $1.23; Rakon easing 2c or 2.53% to 77c; and Smartpay down 2.5c or 1.96% to $1.25.

Cancer diagnostics company Pacific Edge, down 0.001c to 8.7c, reported slightly reduced test volumes of 7188, down 0.3%, for the first quarter of the 2025 financial year.

United States volumes declined 3.2% to 5905 compared with the previous quarter but tests per ordering clinician increased to 6.8 from 6.7. Pacific Edge said the decision concerning Medicare reimbursement for the Cxbladder tests is expected by the end of the month.

Tags: Market Close