Market close: Geopolitics, high yields drive NZ stocks lower

Channel Infrastructure, formerly Refining NZ, has updated its strategy. Photo / Tania Whyte

A worsening geopolitical situation and the continued march higher of bond yields drove New Zealand stocks lower across the board.

By the close, the S&P/NZX50 index was at 11,135.58, down 85.90 points or 0.77 per cent, but off its lows for the day.

Turnover, worth $64.84 million, was light, and there were 95 falls and 38 rises among the 185 stocks traded.

Jeremy Sullivan, investment adviser at Hamilton Hindin Greene, said the deteriorating situation in the Middle East was taking its toll on sentiment, as were sharply higher bond yields in the US and locally.

“There have been a few catalysts leading our market lower today,” Sullivan said.

“One of them is higher bond yields, with US Treasuries hitting a 16-year high.”

The worsening situation in the Middle East has raised fears that sanctions against Iran - a major oil producer - could drive oil prices higher still.

“That would lead to higher inflation and higher interest rates, so it’s a double-edged sword to a certain extent,” Sullivan said.

“It does not look like [US President Joe] Biden’s visit to the Middle East has calmed fears of a broadening conflict.”

The eruption of war between Hamas and Israel in the Middle East puts further upward pressure on rating agency S&P Global’s assessment of geopolitical risk that it already viewed as elevated and worsening, S&P said in a report.

“A key risk in the event of escalation would be the potential for an energy supply shock, which could underpin inflation and weigh on economic activity,” the agency said.

On the NZX, falls were across the board - led by healthcare, industrials, and retail issues - although some stocks rebounded towards the end.

On the upside, travel expenses specialist Serko gained 10 cents to $4.33 and food kit company My Food Bag firmed half a cent to 15.8c.

The power companies were mostly weaker during the day before recovering ground going into the close.

Meridian Energy gained half a cent to $5.08, Genesis Energy rose 1c to $2.42, Contact Energy firmed 3c to $7.95, and Mercury firmed 3.5c to $6.04, while Manawa fell 4c to $4.47.

In retail, Restaurant Brands dropped 19c or 4.7 per cent to $3.86, The Warehouse fell 3c to $1.75, and Hallenstein Glasson dropped 13c to $5.65.

Shares in Tourism Holdings (THL) dropped by 8c to $3.46 after its annual meeting.

The company, perhaps one of the hardest-hit of all the listed companies by the Covid-19 pandemic, said in a statement it had decided not to provide half-year guidance “as it would not give clarity on the performance of the business across the full year”.

It said there were several factors that would need to be considered when comparing the half-year result against the prior corresponding period, including the sale of 310 motorhomes to Jucy in the first half of 2023, and the impact of acquisition accounting adjustments and the THL global crew bonus paid in the first half of 2024.

“These factors should result in the first-half underlying contribution this year being a lesser proportion of the full-year result,” it said.

Channel Infrastructure was down 3c at $1.50.

Channel, formerly Refining NZ, said it would refresh its strategy with a view to “identifying and pursuing the best opportunities for the business as we help fuel New Zealand’s future to 2050 and beyond”. At an investor day, Channel said it is considering an offer of up to $75m in six-year bonds.

In the foreign exchange market, the New Zealand dollar was buttoned down by ongoing US dollar strength - trading at US58.29c - its third-lowest point in the last 20 years.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.