Kathmandu and F&P lead index down

Kathmandu's 1.7 per cent fall made it the worst performer. Photo / Nick Reed

New Zealand shares fell, led lower by Kathmandu Holdings and Fisher & Paykel Healthcare, while Fonterra Shareholders Fund continued Monday's gains.

The S&P/NZX50 Index dropped 27.44 points, or 0.4 per cent, to 7329.19. Within the index, 24 stocks rose, 21 fell and six were unchanged. Turnover was $155.6 million.

The Reserve Bank of Australia cut its cash rate to 1.5 per cent, a fall of 25 basis points. Speaking before the news, Peter McIntyre, investment adviser at Craigs Investment Partners, said the market expected a rate cut.

New Zealand's Reserve Bank will make its next interest rate announcement next week.

"It really puts the pressure on the Reserve Bank of New Zealand to cut again, and I think you'll see a firmer tone across New Zealand stocks as the expectation builds for that interest rate cut in August to eventuate - it's just going to drive our market higher because the market likes low-interest rates," McIntyre said.

Kathmandu Holdings was the worst performer, down 1.7 per cent to $1.77. The shares hit an 18-month high of $1.81 last week and have dipped since then, which McIntyre said could be some profit-taking after the stock gained 17 per cent in July.

Fisher & Paykel Healthcare fell 1.4 per cent to $10.46. The company gets more than 50 per cent of its sales in US dollars, and the shares had been hit by the strength of the kiwi, he said.

Dual-listed banks fell, with Australia & New Zealand Banking Group down 1.3 per cent to $26.90 while Westpac Banking Corp dropped 0.7 per cent to $32.52.

Fonterra Shareholders Fund gained 2.3 per cent to $5.92. The co-operative group kept its forecast farmgate milk price unchanged at $4.25 per kilogram of milk solids and said it expected earnings per share of 50c to 60c for the year to July 2017.

The forecast milk price for 2016/17 means the total payout available to farmers will be $4.75 to $4.85, still below the break-even for many. Industry body DairyNZ yesterday estimated the average farmer's breakeven price for this season would be $5.05/kgMS.

Air New Zealand was the biggest gainer, up 3.1 per cent to $2.33, a three-month high. The price of a barrel of Brent Crude Oil is at US$42.26, the lowest level since April.

Tegel Group Holdings advanced 2.4 per cent to $1.68 and New Zealand Refining Co rose 2.4 per cent to $2.58.

Outside the main index, PGG Wrightson rose 10.6 per cent to 52c.

First NZ Capital analysts followed Wrightson's profit upgrade on Monday by raising their price target for the stock, and yesterday's gain added to Monday's 4.5 per cent rise after the Christchurch-based rural services company beat earnings guidance for the year ended June 30.

Plexure Group was unchanged at 30c. The mobile advertising firm, which changed its name from VMob last month, downgraded its guidance. Its projected $10 million of annualised committed monthly revenue is more likely to be achieved by the end of the fourth calendar quarter than in September.