NZ stocks: Sharemarket pulls back as caution prevails

12.00pm

Yesterday's sharemarket rally on the prospect of decisive action by the United States in Iraq was today replaced by a more uncertain mood.

The NZ50 gross index fell 9.95 points to 1902.08 by noon while the NZSE-40 capital index was down 7.40 points to 1888.32.

Turnover was reasonable at $32 million with lead stock Telecom dominating with nearly $13 million traded. Having gained 8c yesterday, it was down 4c to 422 today.

John Cobb, manager of private stock broking for JB Were, said on-market activity was quiet.

"We are following on from offshore markets -- in a holding pattern and looking to see what develops."

He said a lot of the uncertainty that had been priced into markets had been removed.

"There is still a lot of uncertainty priced in, but less so than there was two days ago. We have to wait for the next phase really."

US stocks finished higher after bouncing around break-even for most of the session, as investors weighed hopes that a US-led attack on Iraq would be quick against signs of a sluggish economy.

The blue-chip Dow Jones industrial average closed up 52.31 points, or 0.64 per cent, to 8,194.23 and the high tech dominated Nasdaq Composite Index added 8.28 points, or 0.59 per cent, to 1,400.55.

The US Federal Reserve held interest rates steady and in an unusual move, jettisoned its so-called balance of risks assessment, saying it could not "usefully characterise" the economy given the uncertainties that abound.

There was a dearth of company-specific news apart from on Sky City Entertainment which fell sharply on the prospect of a smoke ban in its casinos in Auckland, Hamilton and Queenstown.

The stock, one of the best performers on the New Zealand sharemarket over the past three years, dropped around 8 per cent, 71 cents to 805.

Mr Cobb said there was concern that the company would be affected by the proposed legislation.

"A lot of their gamblers do smoke and I guess there is a concern that if they are not allowed to smoke, then it may put some people off," he said.

JB Were's assessment of Sky City was that it was not a major blow for the company as 40 per cent of its gambling areas were non-smoking anyway and more than half of the areas where the bulk of revenue is generated -- on the tables -- is also already smoke-free.

However, it was vulnerable to a fall because analysts assessed the stock as close to fully priced.

"You are talking significant change for them, but not necessarily massive," Mr Cobb said.

There was heavy turnover of more than $5 million.

Sky's subsidiary, Cinema operator, Sky City Leisure, fell even more heavily in percentage terms -- 16 per cent -- 25c to 130.

Insurers benefitted from the continued recovery of the London sharemarket. Amp rose 18c to 830 and Axa rose 9c to 235.

NZ Refining fell 25c to 1605 in response to the sharp fall in oil prices.

Westpac NZ rose 45c to 1500 while Lion Nathan rose 6c to 568.

Tourism sector stocks, the most obvious candidates for a negative response to an Iraq war, showed weakness. Auckland Airport was down 3c to 531 while Air New Zealand was down 1c to 51. Tourism Holdings however was steady on 103.

There were 29 falls and 28 rises among the 101 stocks traded.

- NZPA