Market close: NZ stocks buckle, sink to lowest point for 2023

Shares in rural services group PGG Wrightson have come under downward pressure.

New Zealand stocks buckled under the weight of rising bond yields, taking the market to its lowest point for the year to date.

By the close, the S&P/NZX50 index was at 10,994.08, down 141.505 points or 1.27 per cent.

Turnover, worth $115.1m, was light, and there were 94 falls and 33 rises among the 185 stocks traded on the main board.

The index is now 2,564 points, or 19 per cent, down from its record close, set on January 8, 2020, of 13,558.19.

Comments from US Federal Reserve chairman Jerome Powell to the effect that persistently high US inflation and tight labour markets could warrant further interest rate increases were enough to put the skids under US and other markets around the world.

US Treasuries continued to surge on worries that a surprisingly strong US economy would bring with it more inflation, and therefore bring greater pressure on the Fed to raise official rates.

Key US 10-year bonds are now just under 5 per cent and US 30-year mortgage rates are at their highest point in 23 years.

It’s also been onward and upward for local bond yields. New Zealand Government bonds now trade at 5.58 per cent, having started the month at 5.42 per cent.

“Bond yields have continued to put pressure on across the capital markets and there are very few places to hide,” Harbour Asset Management portfolio manager Shane Solly said.

In addition, geopolitical uncertainty continued to drive oil prices higher, with Brent crude hitting U$93 a barrel.

Overseas merchandise trade statistics for the September quarter, which showed exports fell $1.4 billion (8 per cent), did little to aid sentiment.

High bond yields and exchange traded fund (ETF) rebalancing on the back of changes to the iShares Global Clean Index weighed heavily on the big power companies, which was the main drag on the market, Solly said.

Meridian was the biggest loser, falling 23 cents or 4.5 per cent to $4.85.

Contact Energy fell 7c to $7.88, Mercury NZ dropped 19.5c to $5.85 and Manawa Energy lost 12c to $4.35.

Genesis Energy, which said it planned to pare back retail job numbers by 200 over the next two years, bucked the trend by firming 2c to $2.44.

“They (Genesis) are talking about getting costs out and this is something that we should be thinking about for a number of businesses across New Zealand,” Solly said.

“It’s probably something that we will see a bit more of over the next few quarters as businesses try to reset for slower growth.”

Genesis will release details of its future strategy on November 30.

Brokers Forsyth Barr, in a research note, said the electricity sector appeared to have “defied gravity” over the past two years.

“Our analysis suggests the risk of a negative share price reset is rising with a growing risk of earnings downgrades - from 2027 onwards - and the return of a risk on environment favouring cyclical stocks over defensive yield stocks,” it said.

Among the other big names, Fletcher Building appeared to stabilise after falling sharply last week, ending just 1c down at $4.33.

Rural services firm, PGG Wrightson, dropped 16c to $3.42 but was well off its lows for the day.

My Food Bag, which announced the resignation of its chief financial officer Leanne Dekker, fell by 0.8 of a cent to 15c.

The market faces a slew of annual meetings scheduled for next week.

The EBOS annual meeting is set down for Tuesday and meetings for Skellerup and Winton are due on Wednesday.

Freightways is set down for Thursday and Fletcher Building, Port of Tauranga, and Sky City are due on Friday.

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