New Zealand shares fell for an eighth consecutive day as markets remain focused on the increased likelihood of central banks withdrawing crisis-era support in response to inflation.
Financial markets are now pricing in a 100 per cent chance of a 25 basis point increase to the Federal Reserve rate as early as December 2022.
“All eyes are on inflation,” said Jeremey Sullivan, an adviser at Hamilton Hindin Greene.
“As lockdowns ease and vaccines roll out and all the money in the system its wearing its way into financial markets, housing and just about anything you can really think of at the moment.
“As interest rates tick up that’s usually bad for growth stocks and equity markets in general and people tend to cycle back into value stocks like consumer staples and more defensive assets.”
The S&P NZX50 Index fell 60.26 points, or 0.48 per cent, to 12,368 points on light trading with 50.4 million shares traded on the main board worth $125 million.
There were 69 gainers and 60 decliners out of the 168 listed stocks.
The Warehouse was one standout, closing up 11c, or 3.2 per cent, to $3.55 after posting third-quarter sales of $791.2m – up 35 per cent on the same period last year. The retailer, which also owns Noel Leeming, said it expected net profit of more than $160m for the full financial year, double the previous year’s effort.
Sullivan said with higher sales, higher margins and a higher profit, the company ticked all three boxes in its announcement.
“They’ve had a big change in strategy from sales and promotion to everyday low prices so it seems they have bedded that down and people are certainly keen to invest in their houses at the moment and the discretionary spend is quite strong into that area.”
Steel & Tube also had a reasonable day, climbing 5c, or 4.55 per cent, to $1.15. Fletcher Building was up 1c at $7.34 having soared 116 per cent since this time last year.
Alternative Milk company a2 Milk was up 7c, or 1.17 per cent, to $6.03 after some volatile trading since Monday’s big earnings downgrade. “It seems the market has now priced in that downgrade and is finding a new level where the buyers and sellers are comfortable with the current price,” Sullivan said.
Synlait Milk, whose fortunes are related to a2, fell 8c, or 2.57 per cent, to $3.03. The company announced Angela Dixon had resigned as chief financial officer after nearly a year in the role.
NZX Limited fell 5c, or 2.45 per cent, to $1.99. The company owns SuperLife, which has been selected as a default KiwiSaver provider which should see increased inflows as a result.
The Government announced a major shake-up with five providers not being reappointed.
New providers other than SuperLife included BNZ,BT Funds Management (Westpac), Kiwi Wealth and Simplicity.
ASB, ANZ, AMP, Fisher Funds and Mercer all lost their current default provider status.
Newly listed My Food Bag gained 5c, or 3.47 per cent, to $1.49. The company is due to post its first result as a listed company on May 31.
After a big upward shift on Thursday on updated loan origination numbers, Harmoney fell 9c, or 4.64 per cent, to close Friday’s session at $1.85.
NZME, owner of the NZ Herald, rose 2c, or 2.53 per cent, to 81c. US hedge fund Osmium Partners recently revealed it has increased its stake in the media company to just over 18 per cent.
The energy companies had a mixed day with Contact, Meridian, Genesis and Trustpower all slightly weaker. Mercury gained 8c to $6.54 to buck the trend.
Across the Tasman, Xero fell 4.5 per cent to $112.10 after its result this week.
Further afield, Wall Street stocks bounced back having been pushed lower for three consecutive sessions on inflation concerns.
The S&P 500 index rose 1.2 per cent in New York, led by financial and industrial stocks sensitive to the trajectory of the economy.
The technology-focused Nasdaq Composite rose 0.7 per cent, having neared correction territory on Wednesday when it closed almost 8 per cent below its record high in April. US government debt rallied, with the yield on the benchmark 10-year Treasury sliding 0.04 percentage points to 1.65 per cent.
Data released on Wednesday showed US inflation rose 4.2 per cent year on year in April, with prices rising at a faster pace than economists had forecast. This increased speculation about the Federal Reserve reducing its $120 billion of monthly bond purchases has helped lower borrowing costs and prop up equity valuations.
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