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MARKET CLOSE: Telecom and Air New Zealand gain

Wednesday 8th July 2009

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The NZX 50 Index pared its declines to end the session in positive territory, led by Telecom Corp. and Air New Zealand as investors favoured companies with defensive earnings and the price of crude oil fell.

The NZX 50 rose 4.35, or 0.2%, to 2750.59. Within the index, 16 stocks rose, 26 fell and nine were unchanged. Turnover of $109.7 million was boosted by 14 million Telecom shares changing hands.

Earnings kick off on Wall Street tomorrow, with aluminium producer Alcoa Inc. Chief executive Klaus Kleinfeld said in a Bloomberg interview that he is “very optimistic” about sales in China while there are signs U.S. automakers are starting to recover.

Profits at S&P 500 companies fell an average 34% in the second quarter, according to Bloomberg. “It’s going to be very interesting to see where the profit share is going,” said Paul Harrison, equities manager at BT Funds Management. “Stronger companies are managing to stop too much margin being taken away from them by controlling costs.”

Telecom (NZX: TEL ) staged a late rally, climbing 3.7% to $2.80. Air New Zealand (NZX: AIR ) gained 2.3% to 89 cents as the price of crude oil tumbled for a sixth straight day, lifting optimism for cheaper jet fuel prices.

Crude oil for August delivery fell as much as 1.5% to US$61.99 a barrel on the New York Mercantile Exchange.

New Zealand Oil & Gas (NZX: NZO ) fell 2.6% to $1.52 as oil led a decline in commodity prices and after the  company said it ‘deeply regrets’ an oil spill in 2007 from the Tui oilfield, in which it has a 12.5% interest. Field operators and contractors for the Tui face total fines of $105,000 relating to a systems failure that resulted in a three minute oil discharge into the sea in October 2007.

Pike River Coal (NZX: PRC ) fell 2.6% to $1.12.Investors are awaiting the start of the second-quarter earnings season, amid expectations most firms will post weaker profits.

Briscoe Group (NZX: BGR ), the operator of homeware, Rebel Sports goods, Urban Loft and Living & Giving chains, gained 1% to $1.01 after managing director Rod Duke said first-half earnings are expected to exceed the year-earlier $3.6 million because of cost cutting in the face of “pretty static” sales. 

“Last year was the worst period I can remember in the 20 years I’ve been in this country,” he told Morning Report. “We’re pretty cash rich at the moment – we’re holding no debt at all.”

Jeweller Michael Hill International (NZX: MHI ) climbed 1.6% to 63 cents. Tap maker Methven Ltd (NZX: MVN ) rose 1.6% to $1.32. The company plans to defend itself against an action being taken by the Commerce Commission over claims it had made on tapware products.

Steel & Tube Holdings (NZX: STU ), which supplies steel building products, gained 1.5% to $2.80. Nuplex Industries (NZX: NPX ), the specialty chemicals maker, rose 1.4% to $1.47.

Ebos Group (NZX: EBO ), a distributor of medical supplies, fell 4.4% to $5.20, the biggest decline on the NZX 50 today.

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