Reserve Bank hike, soaring dollar hammer shares

By NZPA

Thursday 7th June 2007

The sharemarket fell over 1% today after the Reserve Bank surprised many economists with its third interest rate hike of the year.

There were few rises among top-50 stocks after the Reserve Bank hiked the cash rate to 8%, and his toughly worded statement prompted comments from some economists that a further rise was on the way.

The bank's move also boosted the New Zealand dollar to a fresh post-float high of nearly US75.7c, further bad news for exporters.

The benchmark NZSX-50 closed down 59.58 points, or 1.39%, at 4234.63 on turnover totalling $154.5 million.

That followed a sharp fall on Wall Street, where US stocks slipped on concerns about inflation and interest rates, and weakness around the region today.

There were 94 falls and 31 rises among the 163 stocks traded.

"I think some investors are maybe just looking for an excuse to take some profit," Hamilton Hindin Greene partner Grant Williamson said.

"The market's been good for quite some time, and maybe they're getting that wee bit nervous that eventually the interest rate hikes have got to take effect on the domestic economy."

Top stock Telecom fell 8c to $4.72, Fletcher Building was down 20c at $12.70, and Contact Energy shed 22c to $8.78.

Fisher & Paykel Healthcare lost 6c to a one-and-a-half year low of $3.40, although F&P Appliances was flat at $3.81.

The Warehouse rose 39c, or 6.3%, to $6.55 on heavy turnover worth $9.3m after newspapers reported Woolworths had agreed to offer $7.15 a share for the company, valuing it at $2.2 billion.

Warehouse chairman Keith Smith later denied receiving a bid, although the company had been in discussions with Woolworths and fellow potential bidder Foodstuffs.

The Commerce Commission is due to release its decision tomorrow.

Sky City fell 9c to $5.01, Vector was off 9c at $2.81, and Auckland Airport fell 3c to $2.69.

Air NZ fell another 4c to $3.10 to add to the 4c it lost yesterday, despite it being a net beneficiary from a stronger NZ dollar.

Tourism Holdings was unchanged on $2.76. The Cushing family announced they had sold their near 10% stake to takeover bidder MFS Living. The stake had the potential to block the takeover.

Among the remaining few top-50 shares to rise, jeweller Michael Hill gained 9c to $9.39, carpetmaker Cavalier was up 4c at $3.19, Steel and Tube rose 3c to $4.77, and NZ Refining was up 2c at $7.20.

Japan's Nikkei was nearly flat today, despite a fall in Sony and some other exporters decline following a tumble in US and European stocks. Australia's benchmark index was down 0.5% at 6303.8.

Earlier on Wall Street, the Dow Jones industrial average fell 0.96%, the Standard & Poor's 500 Index tumbled 0.89%, and the Nasdaq Composite Index skidded 0.92%.

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