Market close: NZ stocks end soft as investors await the US Fed

Meridian Energy fell 16.5c or 2.8 per cent to $5.73. Photo / File

A sudden drop in the price of two big power companies dragged the New Zealand sharemarket down while investors focused on the outcome of US Federal Reserve's open market committee meeting, due out tomorrow morning for hints about the future direction of interest rates.

The S&P/NZX50 index dropped by 71.10 points or 0.56 per cent to 12,622.21.
There were 78 gains and 65 falls among the 72.5 million shares (worth $253.5 million) traded.

Meridian Energy's 16.5c or 2.8 per cent fall to $5.73, Contact's 33c, 4.5 per cent, decline to $6.97, were seen as being driven by exchange traded fund selling, possibly on the back of US based Plug Power, which fell sharply after the fuel-cell company said it will have to restate financial statements for 2018 and 2019.

"It's hard to speculate, but Meridian and Contact are members of a much-talked-about clean energy index in the US, and by far the largest constituent of that index is Plug Power," Salt Funds managing director Matt Goodson said.

Goodson said it was possible Meridian and Contact may have been caught as investors sought to exit the fund on the back of Plug Power's announcement.

But in the big picture, investors were focusing in on the Fed's next move.

"There is potential for a significant move in bond yields in either direction depending on what the Fed says," Goodson said.

"Obviously the market is really sensing a return of inflation," he said.

The local market, with its large proportion of dividend-yield stocks, is highly sensitive to bond yield movements.

Shares in Z Energy rose 13 cents or 4.6 per cent to $2.92 after the company said it had successfully renegotiated the covenant waivers with its banking syndicate and USPP holders, allowing the company to re-start dividends.

Goodson said that a Z dividend would be attractive.

"But the key thing is, what will be the likely longevity of that dividend, given the structural headwinds," he said.

Fishing company Sanford saw its shares drop by 37 cents, 7.6 per cent, to $4.50 after it advised that it's year-to-date trading conditions had remained challenging due to the ongoing impact of Covid 19.

Sanford said that while longer-term dynamics remained positive, difficult conditions could remain for the full financial year.

The company will report its interim result in the second half of May.

Fonterra's units fell 1c to $5.08 after reporting a strong lift in first-half earnings and declaring its first interim dividend in two years.

The co-op revealed a 17 per cent lift in operating earnings but said the strong milk price would weigh on the second half.

Auckland International Airport dropped by 17c or 2.2 per cent to $7.60 after reporting another dismal, Covid-affected monthly traffic update.

Goodson said the stock was most likely reflecting investors' frustration over a lack of a travel bubble with Australia.

In its update, Auckland Airport said total passenger volumes fell by 71.8 per cent in January 2021 versus last year.

International passengers (excluding transits) were down 97.6 per cent. Domestic passengers were down by 30.7 per cent.

Cinema software company Vista, a so-called "reopening" stock, fared well, gaining 5c to $2.03.

AFT Pharmaceuticals rallied by 14 cents or 3.24 per cent to $4.46 after announcing that it had signed a new commercialisation and development agreement for its "orphan" drug Pascomer, covering the 27 countries within the European Union as well as Switzerland, Norway and the United Kingdom.

An "orphan" is a pharmaceutical agent developed to treat medical conditions which, because they are so rare, would not be profitable to produce without government assistance.