Hotter-than-expected US inflation sours mood; Cannasouth CEO exits - Market close

Hotter-than-expected inflation in the United States sent Wall Street and the local sharemarket lower. Photo / 123RF

An unsettled New Zealand sharemarket had a late surge after being dragged down by rising wholesale interest rates and hotter-than-expected United States inflation.

Following a sharp fall on Wall St, the S&P/NZX 50 Index soon gave up the gains of the day before. The index recovered with increased trading in the last half-hour matching session and closed at 11,934.31, down 37.61 points or 0.31 per cent after hitting an intraday low of 11,845.04.

There were 62 gainers and 72 decliners on the main board with 28.56 million shares worth $107.77 million changing hands.

The US March consumer price index increased 0.4 per cent representing annual inflation of 3.5 per cent, up from 3.2 per cent in February, compared with forecasts of 0.3 per cent and 3.4 per cent.

The minutes from the last Federal Reserve meeting showed officials were wary about the persistence of inflation, and a resilient economy and strong jobs market were allowing the central bank to take its time with interest rate cuts.

The Dow Jones Industrial Average fell 1.09 per cent to 38,461.51 points; S&P 500 declined 0.95 per cent to 5160.64; and Nasdaq Composite was down 0.84 per cent to 16,107.36.

Jeremy Sullivan, investment adviser with Hamilton Hindin Greene, said initially the US markets were pricing in six rate cuts this year; now it’s down to two and a small chance for a third.

“Inflation is taking longer to come down than the markets priced in and in the meantime bond yields have gone up – and this has impacted interest rate-sensitive stocks such as utilities,” he said.

The US 10 Year Treasury Note yield went back over 4.5 per cent (4.541 per cent the highest this year), and the NZ 10 Year Government Bond yield increased 12.6 basis points to 4.783 per cent.

The five-year swap rate in New Zealand has risen 40 basis points or 10 per cent to 4.6 per cent this month.

Sullivan said the writing is on the wall for a fall in term deposits and for those investors sitting on the sideline, there’s an attractive entry point into stocks with sound fundamentals.

Meridian Energy fell 12c or 2.06 per cent to $5.71; Mercury was down 11.5c to $6.772; Vector eased 6c to $3.75; Auckland International Airport shed 20c or 2.42 per cent to $8.06 on trade worth $11.9m; and Fletcher Building declined 6c to $3.94.

Freightways was down 14c to $8.58; Hallenstein Glasson declined 12c or 1.94 per cent to $6.07; Comvita shed 5c or 2.26 per cent to $2.16; Scales Corp eased 6c or 1.84 per cent to $3.20; and Colonial Motor Co decreased 20c or 2.35 per cent to $8.30.

Synlait Milk was down 3c or 4.84 per cent to 59c; CDL Investments decreased 2c or 2.53 per cent to 77c; Smartpay was down 5c or 3.23 per cent to $1.50; and Eroad fell 4c or 4.49 per cent to 85c.

Tourism Holdings was up 8c or 2.75 per cent to $2.99; Rakon increased 4c or 3.51 per cent to $1.18; AFT Pharmaceuticals added 9c or 2.86 per cent to $3.24; 2 Cheap Cars was up 2c or 2.56 per cent to 80c; and Cooks Coffee also gained 2c or 8.33 per cent to 26c.

In the property sector, Argosy added 2c or 1.76 per cent to $1.155, and Kiwi also gained 2c or 2.38 per cent to 86c.

NZME, up 3c or 3.45 per cent to 90c, told shareholders at the annual meeting that digital revenue, told shareholders at the annual meeting that digital revenue for its OneRoof property business rose 69 per cent year-on-year, with operating earnings (ebitda) of $1.4m for the first quarter ending March compared with a loss in the previous year.

NZME said overall advertising revenue was up 4 per cent year-on-year, reflecting its increased market share. The broadcaster and publisher forecast full-year ebitda of $57m-$61m compared with $56.2m last year and remained cautious due to the current operating environment.

Chatham Rock Phosphate gained 0.006c or 4.14 per cent to 15.1c before going into a trading halt at the request of market regulator NZ RegCo. Chatham Rock was asked to explain the nature of the application process after telling the market that it had been invited to apply for the fast-tracking process concerning its Chatham Rise phosphate project.

ArborGen Holdings, unchanged at 16c, earlier told the market that full-year operating earnings (ebitda) is expected to be at the upper end of previous guidance of US$11.6m-$12.6m (NZ$19m-20.74m). Net debt is expected to be 25-35 per cent lower than previously advised.

Cannasouth, in administration and suspended from trading, told the market that chief executive Mark Lucas has resigned and left the medicinal cannabis company.