Strong dollar, rates decision keeps market pinned down

By NZPA

Wednesday 6th June 2007

Interest rate decisions at home and abroad appeared to sideline investors on a negative sharemarket today.

The benchmark NZSX-50 fell 0.4% or 17.9 points to 4294.20. Total turnover was $203 million, with 39 rises and 67 falls on 152 stocks traded.

Overnight, Wall St dipped on signs that US interest rates would not be cut this year, and the Australian sharemarket was down after a "hold" decision by Australia's central bank.

But in New Zealand, the key focus was on the Reserve Bank cash rate decision tomorrow and the rise of the New Zealand dollar to a new post-float high.

"We've continually been saying to clients that it has been increasingly difficult in the New Zealand equity market and in terms of the industrial sector in the Australian market to find value," broker Kerry Porter of Macquarie Equities said.

This week had also seen an acceleration of profit downgrades, also coming on the back of the strong dollar.

"....There's no compelling reason to suggest that the New Zealand dollar is going to fall any time soon," Porter said.

On the market, good news from Air NZ failed to lift the share price today, with the stock down 4c to $3.05. The airline's online sales surpassed the $1 billion mark for the first time, and said it had passed its annual sales target of $1 billion a month early.

Skellerup, which yesterday signalled a loss of $7 million for 2007, fell 9c to $1.02.

The company has been hit by restructuring costs and slower trading as a result of the high dollar, and Porter said its move to international financial standards next year would take away goodwill amortisation.

"So while they're talking about a profit uplift [next year], that's probably more modest than the bare numbers indicate."

Market debutant, Xero, rose 2c to $1.12 and NZ Windfarms fell 28c to $1.23 as it moved up to the main NZSX board.

Infratil rose 14c to $6.80 on a higher than normal, $2.8 million turnover. Porter said Infratil might be benefiting from the international sale of airport assets, but its share price was only back to the point it was after its strong result.

Among the leaders, Fletcher Building was down 6c to $1.29; Contact Energy down 5c to $9.00; Sky City down 7c to $5.10; Sky TV down 13c to $5.62; and the Warehouse, down 9c to $6.16.

Porter thought a global selloff in the bond market was affecting building and property stocks, which were sensitive to interest rates.

Other moves included Methven down 9c to $2.31 and PGG Wrightson was down 9c or 5% to $1.69

Rises included Tower up 7c to $2.51, and biotech firm Pacific Edge up 1.5c or 12.5% to 13.5 after announcing a research agreement with the international Ludwig Institute for Cancer Research.

On Wall Street, US stocks fell after Federal Reserve chairman Ben Bernanke warned inflation was still a major concern, all but dashing remaining hopes for an interest-rate cut this year.

Bernanke said the economy was set to grow at a moderate pace, close to or slightly below its current pace, in coming months, but he warned that the risks of elevated levels of inflation, excluding food and energy, may not recede.

The Dow Jones industrial average slid 80.86 points, or 0.59%, to end at 13,595.46. The Standard & Poor's 500 Index fell 8.23 points to finish at 1530.95 and the Nasdaq Composite Index declined 7.06 points to 2611.23.

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