NZX50 drops 1.6% as Wall Street slides on rising inflation expectations

Monday 5th February 2018

New Zealand shares took an early tumble, tracking a sharp fall on Wall Street on Friday after strong US jobs data fuelled concerns US inflation will accelerate faster.

The benchmark S&P/NZX50 Index fell 131.8 points, or 1.6 percent, to 8,283.48 as at 11.25am in Wellington, following Wall Street lower after the Dow Jones Industrial Average slid 2.5 percent, the Standard & Poor’s 500 Index dropped 2.1 percent, and the Nasdaq Composite Index retreated 2 percent.

A Labor Department report showed US employers added 200,000 jobs in January and average hourly earnings increased 2.9 percent from a year earlier, the biggest gain since June 2009. The gain in wages adds to concerns inflationary pressures will lead to higher interest rates, taking some of the shine out of equities.

Leading local decliners included a2 Milk, down 3.3 percent to $9.04, and Pushpay, down 4.2 percent to $3.93. Both have shown strong gains, however, with a2 Milk up around 300 percent over the past year and Pushpay up 150 percent.

The sharp US sell-off has triggered "a little bit of profit-taking, a little bit of defensiveness," said Forsyth Barr broker Suzanne Kinnaird, noting the hardest hit stocks have had very good recent gains.

"People are taking a bit of money off the table," she said.

Bryon Burke, head of equities at Craigs Investment Partners, also noted the biggest losers are the stocks with larger overseas registers and "they are also the ones that have been pushing the price higher, with money from overseas coming into these stocks."

Both Kinnaird and Burke noted that trading is very light ahead of Tuesday's public holiday in New Zealand as many market participants will have opted to take a four-day weekend. Turnover was $12.6 million. "There is negative sentiment but not aggressive selling by any means," said Burke.

Kinnaird said some investors will also be positioning themselves given US markets will have two sessions before New Zealand opens again on Wednesday.

Both said investors will be keeping a close eye on the Australian open for further direction.

(BusinessDesk)

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