OCR rate hike prediction rattles sharemarket - Market close

The S&P/NZX 50 Index was down 9.37 points or 0.08 per cent to 11,862.95.

The New Zealand sharemarket was rattled by the suggestion by ANZ the Reserve Bank could still hike the official cash rate (OCR) twice this year.

The S&P/NZX 50 Index had a late rise after reaching an intraday low of 11,782.24 and closed at 11,862.95, down 9.37 points or 0.08 per cent.

The index finished the shortened week with a fall of nearly 0.6 per cent but it is still ahead more than 0.5 per cent for the year to date.

There were 57 gainers and 69 decliners over the whole market on volumes of 21.83 million transactions worth $89.51 million.

The market was surprised by the ANZ Research forecast of 25 basis point rises in the OCR in February and April, taking the rate to 6 per cent. Their economists now believe the first rate cut will occur next February, instead of August this year.

The Reserve Bank meets on February 28 and April 10 to provide its latest monetary policy statement.

The NZ dollar strengthened to A94.35c against the Australian – a one-year high after sitting at 93c at the end of January.

ANZ said the Reserve Bank warned in November that if inflation pressures were to be stronger than anticipated, the OCR would likely need to increase further. Data since then has been a series of small but pretty consistent surprises in that direction.

The Reserve Bank will be aware that restarting hiking cycles when per capita gross domestic product is down 3 per cent might appear counterintuitive. But at the end of the day, they have a job to do - getting inflation sustainably down to 2 per cent in the medium term.

“We just don’t think the Reserve Bank committee will feel confident that they’ve done enough to meet their inflation mandate,” ANZ said.

Shane Solly, portfolio manager with Harbour Asset Management, said the ANZ forecast was another perspective. There have been a series of economic data at the higher end of expectation and this is making it tougher for the Reserve Bank to think about cutting the OCR.

“There is going to be data pointing both ways – reducing or increasing the OCR – and the Reserve Bank has to be careful about making policy decisions. Companies are not facing pressure from labour costs and hiring people, and it would be a big call for the Reserve Bank to hike the OCR,” Solly said.

In the United States, the S&P 500 broke through the 5000 points mark for the first time during intraday trading but it closed at 4997.91, up 0.057 per cent.

In Japan, the Nikkei 225 Index hit a 34-year high after gaining 0.44 per cent to 37,024.25 points at 5.45pm NZ time. Bank of Japan said it was unlikely to raise interest rates aggressively, even after ending its negative interest rate policy.

At home, Fisher and Paykel Healthcare was down 13c to $24.42; Meridian Energy shed 5c to $5.61; Freightways declined 11c to $8.33; ANZ Bank decreased 80c or 2.72 per cent to $28.66; and SkyCity gave up 4c or 1.89 per cent to $2.08.

In the property sector, Argosy declined 2c or 1.74 per cent to $1.13; Stride was down 2c to $1.36; Investore also shed 2c to $1.17; and Vital Healthcare Trust increased 5c or 2.35 per cent to $2.18.

Wine exporters Foley Wines fell 12c or 10.26 per cent to $1.05, and Delegat Group was down 10c to a seven-year low of $5.90.

Michael Hill decreased 3c or 3.26 per cent to 89c; Restaurant Brands was down 6c to $3.79; Smartpay Holdings declined 3c or 1.93 per cent to $1.525; Blackpearl Group shed 2.5c or 5 per cent to 47.5c; and My Food Bag gave up 0.008c or 5.06 per cent to 15c.

Ebos Group was up 41c to $36.40; Vista Group collected 4c or 2.5 per cent to $1.64; Green Cross Health increased 5c or 4.24 per cent to $1.23; 2 Cheap Cars added 2c or 2.5 per cent to 82c; and T&G Global gained 4c or 2.12 per cent to $1.93.

NZ Rural Land, unchanged at 95c, has completed the sale of a 25 per cent shareholding to Sydney investment firm Roc Partners for $44.2m. NZ Rural will use some of the money to repay the $11.8m convertible note.