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The sharemarket gained as investors bet interest rates may not gain as much as previously thought.
- NZX 50 Index rose 1.5%
- Unemployment rise boosted market
- Less pressure seen on interest rates
The sharemarket gained after unemployment rose, stoking speculation the Reserve Bank may not raise interest rates as aggressively in the future.
The benchmark S&P/NZX 50 Index advanced 1.5%, or 172.57 points, to 11,705.03 on Wednesday. On the broader market 89 stocks rose and 46 fell with $127 million shares traded.
A report from Stats NZ showed unemployment edged up to 3.3% in the second quarter, from 3.2% in the first quarter. That surprised economists who had expected a further decline, and prompted some in the market to cool their interest rate expectations.
“The unemployment number that came out this morning missed expectations quite significantly,” said Hobson Wealth Partners investment adviser Brad Gordon. “It does show an early sign potentially of the tide turning.
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“If we start seeing a tick up in unemployment, then that gives the Reserve Bank a little bit of comfort to not be so aggressive.”
Following the unemployment report, the 5-year swap rate, used by banks to switch between the variable rate of a loan to a fixed rate, dropped to 3.44% from 3.52% yesterday, signalling a pullback in interest rate expectations.
The Reserve Bank Te Pūtea Matua is scheduled to review its benchmark interest rate later this month. The official cash rate has increased from 0.25% in August last year to 2.5% as the bank moves aggressively to curb high inflation.
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Gordon said the changing interest rate expectations increased demand for stocks which rely on longer term future earnings, and those with higher yields.
Among the generation retailers, Meridian Energy gained 3.3% to $5.215, Mercury advanced 1.8% to $6.30, Contact Energy rose 2.5% to $7.73 and Genesis Energy increased 1.4% to $2.90.
Telecommunications company Spark was the biggest stock traded by volume, up 1.9% to a record $5.18. Medical device manufacturer Fisher & Paykel Healthcare was the biggest traded by value, up 1.3% to $21.49.
Retirement village stocks, which would benefit from lower mortgage rates, gained.
Summerset Group rose 3.4% to $11.11, Ryman Healthcare advanced 1.7% to $9.35 and Arvida Group edged up 0.7% to $1.50.
Fishing company Sanford fell 1.2% to $4.10 after reporting that third-quarter sales were up 14%, but labour constraints, inflation and warmer sea temperatures were impacting the business.
NZX fell 0.8% to a two-year low of $1.20 after the market operator said it experienced soft trading in equities in wholesale and retail markets in July due to ongoing market volatility and uncertainty.
A total of $2.46 billion was traded across the NZX in July, down 20% from June. This was across both wholesale and retail markets, with wholesale down 20.7%, and retail down 16.4%.
The a2 Milk Company advanced 0.9% to $5.47, taking its gain this week to 9.6%, after speculation the company may soon get approval to sell baby formula in the US, where authorities have relaxed import rules as they seek to fill a shortage.
Asian stock markets were mostly higher as traders watched for signs trade might be disrupted by US- Chinese tensions over an American lawmaker’s visit to Taiwan.
Shanghai, Hong Kong, Tokyo and Seoul advanced after Beijing announced a ban on imports of some Taiwanese goods but no immediate major penalties following the arrival of Speaker Nancy Pelosi of the US House of Representatives.
The mainland’s ruling Communist Party claims Taiwan as part of its territory and rejects foreign official contact with the self-ruled island democracy.
Taiwan’s Taiex shed 0.3% after Beijing announced a ban on citrus and some fish from Taiwan to show its displeasure at Pelosi’s visit. The mainland announced military manoeuvres in areas surrounding Taiwan but no indication it might punish industries such as Taiwanese producers of processor chips needed by Chinese factories that assemble the world’s smartphones.
Sydney’s S&P-ASX 200 shed 0.4% to 6,968.70.
– With AP
