Market close: Oil price fall, lower yields, boost NZ stocks

A rally in Fisher and Paykel Healthcare shares helped drive the sharemarket higher.

A sharp fall in oil prices and a dip in US Treasury yields helped drive New Zealand stocks to a stronger finish as turnover thinned out in the leadup to the election.

The S&P/NZX50 index gained 74.05 points or 0.66 per cent to 11,309.10 after being mostly flat early in the session.

Turnover was worth just $89.8 million and there were 83 gains and 48 falls on the main board.

Oil prices plunged by more than US$5 a barrel over concerns that sharp increases in borrowing costs caused by higher interest rates could dent economic growth.

Brent crude settled US$5.11 a barrel, or 5.6 per cent, lower at US$85.81 a barrel after its biggest one-day drop since August 2022.

The market also got a boost from an eight basis point move down in benchmark US Treasuries to 4.74 per cent after they hit a 16-year high earlier in the week.

Jeremy Sullivan, investment advisor Hamilton Hindin Greene, said the market was taking its lead from firmer Australian markets, the oil price fall, and weaker bond yields.

Turnover however was thin, which was to be expected going into the October 14 election.

“With the election just around the corner, the positive cues from offshore were enough to see a lift on our boards today,” Sullivan said.

Among the big-name stocks, Fisher and Paykel Healthcare gained 50 cents (2.3 per cent) to finish at $22.23 and Contact Energy firmed 7c to $8.07.

Chorus rallied by 13 cents to $7.63, EBOS firmed 74 cents to $34.95 while Fletcher Building gained 8c to $4.80.

High domestic interest rates were having their import on the retail stocks, with The Warehouse falling 3c to $1.75, Briscoe Group losing 8 cents to $4.57 and Hallenstein Glasson dropping 5 cents to $5.80.

“Unfortunately, the update from the Reserve Bank this week did point to higher for longer interest rates and that does put downward pressure on available money to spend in a discretionary fashion,” Sullivan said.

Westpac expects the Reserve Bank’s official cash rate (OCR) to hit 5.75 per cent in November (from 5.5 per cent currently). “We now don’t see OCR reductions until early 2025, with a slow decline from there to 4.0 per cent in 2026 and 3.5 per cent from 2027 onwards,” the bank said.

Research group Morningstar, in its New Zealand Equity Market Outlook for the fourth quarter, singled out a2 Milk as a “top pick”.

“There is much to like about a2 Milk, notably in China, the key battleground,” Morningstar said. A2′s share of Chinese-language-labeled infant formula continues to grow, supported by the a2 ‘Platinum’ brand, it said.

“We forecast 9 per cent annual revenue gains to fiscal 2028 as channel inventory levels normalize and market share increases; alongside improved sales of higher-margin English-label product and operating leverage from higher revenue,” it said.

A2 Milk finished steady at $4.50.

Morningstar also singled out power company Manawa (down 7 cents at $4.48) and casino operator Sky City (unchanged at $1.90) as “top picks” for the quarter.

A2 Milk’s closely allied supplier, the cash-strapped Synlait Milk finished at $1.37, down 3 cents, while its NZX-traded bond yields remained elevated at 17.5 per cent.

Among the other movements, steel distributor Vulcan rallied by 17 cents (2.1 per cent) to finish at $8.25 while Port of Tauranga fell 8 cents to $5.82.

Among the smaller issues, used car dealership 2 Cheap Cars - which issued a positive earnings update last week - continued on its upward trajectory, gaining 6 cents (7.3 per cent) to close at 88c, despite the company being censured this week by the NZ Markets Disciplinary Tribunal for not having enough independent directors.

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