Market close: New Zealand shares follow Wall Street lower

Aussie banks and a2 Milk led the market lower. Photo / Greg Bowker

New Zealand shares drifted lower in the wake of a bad Friday on Wall Street sparked by concerns that global interest rates could climb sooner rather than later.

The sentiment spread into Asian markets and Australia with the ASX 200 sharply lower, dragged down by financial stocks.

Amid that backdrop the S&P NZX 50 Index held up reasonably well to close down 52.57 points, or 0.42 per cent, at 12499.36 points.

Trading was on the light side, with 43.5 million shares traded worth $160.4m on the main board.

Westpac, down 71c at $28.27, and ANZ, down 98c at $30.27, bore the brunt of the weaker Australian market while a2 Milk also suffered - falling 25c to $6.50.

Greg Main, an adviser at Jarden, said investors remain focused on when the US Federal Reserve could start tightening interest rate policy.

"The last couple of weeks the market has been all about the Fed and everyone is just waiting to see what's said next. It kind of feels like the market has bought the rhetoric but they don't completely believe it. There are still risks that things move quicker than previously thought."

On Friday, Wall Street posted its worst weekly loss since October as traders feared the Federal Reserve could start raising rates sooner than expected. The blue-chip average dropped 1.6 per cent on Friday, while the Nasdaq closed 0.9 per cent lower.

The CBOE volatility index (VIX), Wall Street's fear gauge, spiked to 20.60 points, its highest level since May 21.

Main said that weighed on our market, with investors now awaiting comments from Fed chair Jerome Powell later this week.

Here at home the most significant news of the day came from Mercury NZ, with the electricity gentailer saying it will pay $441m in cash to acquire the retail arm of rival Trustpower.

The binding deal, which requires Commerce Commission and other approvals, follows a strategic review by Trustpower of its retail assets undertaken in January.

"That will give Mercury greater scale and it will be interesting to see what Trustpower does with the proceeds, whether it's a capital return or something else," Main said.

Mercury rose 10c to $6.40 and TrustPower, which is 51 per cent owned by infrastructure investor Infratil, fell 14c to $7.96. Infratil shares closed at $7.545, up 2.5c.

Genesis Energy fell 2c to $3.34 while Meridian gained 1c to $5.19.

Sky Television, which now competes with Trustpower and others with its new broadband service, was up a smidgen at 16.8c.

Pacific Edge gained 4c to $1.24 after announcing healthcare giant Kaiser Permanente would begin using its Cxbladder triage product from July, following adoption of other Pacific Edge products last year.

Newly listed DGL Group was unchanged at $1.30. The Auckland-based chemicals and dangerous goods company said it had gained approval to build a new warehousing, distribution and manufacturing facility in Irongate, Hawke's Bay.

The warehouse, which will store around 5000 tonnes of chemicals, is expected to cost about $5m and will be funded from proceeds of the company's initial public offer.

DGL listed on the ASX and NZX after raising $100m from an IPO priced at $1 a share.

City developer Precinct Properties slipped 4c to $1.55. The company said it had completed a bookbuild for an underwritten $220m placement as part of a $250m capital raise announced last week. The placement was fully subscribed at $1.52 a share.

Precinct, known for its Auckland high rise developments, plans to use the new capital to buy two Wellington re-development opportunities and fund its Bowen House project.