Global fears about the impact of a new coronavirus in China dented trading on Wall Street and may weigh on local sentiment.
Chinese officials confirmed the new coronavirus outbreak can spread between humans, stoking fears of a global pandemic and reviving memories of Severe Acute Respiratory Syndrome or SARS, another coronavirus outbreak that killed nearly 800 people in 2002 and 2003.
• Spread of coronavirus in China puts millions on alert
• First U.S. case of potentially deadly coronavirus confirmed in Washington state
• China virus: Fears for rapid spread after human-to-human transmission confirmed
• Science Says: What you need to know about the viral outbreak in China
The virus comes as millions of Chinese prepare to travel for the Lunar New Year. According to CNN, South Korea has confirmed its first case, making it the third country outside China to detect the virus. Thailand and Japan have also reported cases.
"When news of a potential global risk hit the news wires, investors get a bit nervous," said Kiwibank FX trader Mike Shirley. The S&P 500 was recently down 0.3 per cent while the Dow Jones Industrial Average was down 0.6 per cent, following weak Asian stock markets yesterday.
Local stocks with exposure to the tourism sector include Air New Zealand, Auckland International Airport and Tourism Holdings.
ASX futures are pointing to a fairly muted open across the ditch, up 7 points at 7,015. New Zealand's stock market held up yesterday as investors remained attracted to companies offering reliable dividends, such as electricity generator-retailers Contact Energy and Meridian Energy.
The possible impact of the coronavirus is also weighing on the Australian and kiwi dollars given the nations' exposure to China. However, a positive overnight dairy auction is supporting demand for the kiwi at around 66 US cents, which recently traded at 65.98 cents.
Global dairy prices lifted 1.7 per cent in the latest GDT auction and whole milk prices were up 2.4 per cent to an average US$3,233. The lift in whole milk prices bodes well for the farmgate milk price, but may weigh on milk processors Synlait Milk and Fonterra Shareholders' Fund units, whose margins can come under pressure when milk prices are high.
ANZ Bank agriculture economist Susan Kilsby said New Zealand rates will likely be dominated by offshore moves given the risk off sentiment. She expects the curve to be lower and flatter in yield on the day. The yield on the US 10-year Treasury was down 6.4 basis points at 1.771 per cent, while New Zealand's 10-year government bond yield rose 1.5 basis points to 1.575 per cent from late yesterday.
Global markets are also keeping an eye the World Economic Forum in Davos. US President Donald Trump used his speech to tout the success of the world's biggest economy saying the American dream is back "bigger, better and stronger than ever before." He also took another shot at the US Federal Reserve.
"The Fed raised rates too quickly and has lowered them too slowly," Trump said. The speech also coincided with the beginning of a trial in the US Senate to determine if he should be removed from office. Just prior to his speech Trump said the trial was a "witch hunt" and "disgraceful."