New Zealand shares dropped today ahead of two cash rate announcements, with Orion Health Group, Air New Zealand and Scales Corp falling.

The S&P/NZX 50 Index fell 27.27 points, or 0.4 per cent, to 7281.17. Within the index, 27 stocks fell, 15 rose and eight were unchanged. Turnover was $194.6 million.

The US Federal Reserve is due to announce whether it will hold or change interest rates early tomorrow morning local time, and the Reserve Bank of New Zealand's official cash rate review will also be announced in the morning. The local market plunged last week amid fears that the Fed would raise rates, but that selling has calmed.

"We are seeing quite big ranges on a number of stocks and not necessarily with large volumes either," said David Price, broker at Forsyth Barr. "What we've seen is a rotation out of interest-rate-sensitive stocks and into more cyclical stocks in the last three weeks, Mr Draghi came out and said well, no more medicine for the patient, and that's making people refocus."


This month the European Central Bank's president Mario Draghi said there were limits to monetary policy and dashed hopes that it would expand its stimulus programme.

Orion Health Group led the index lower, down 5.3 per cent to $3.60, and has gained 18.8 per cent this year.

Air New Zealand dropped 3.3 per cent to $1.89, Scales Corp fell 2.8 per cent to $3.11, and A2 Milk Co dropped 2.6 per cent to $1.86.

The biggest gainers were the dual-listed banks, with Australia and New Zealand Banking Group up 2.4 per cent to $28.22 and Westpac Banking Corp advancing 1.5 per cent to $30.90.

Auckland International Airport rose 2.3 per cent to $7.21. The price veered between $7.09 and $7.30, with 1.2 million shares traded and Price said this was indicative of large price movements being driven by overseas investors, albeit without a lot of volume.

Kathmandu Holdings gained 2 per cent to $2.02, and has advanced 27 per cent this year. The Christchurch-based retailer lifted annual profit 64 per cent to $33.5m and will pay a bigger dividend after more rigorous inventory management helped fatten margins. Gross margin widened to 62.6 per cent from 61.5 per cent, and sales rose 4 per cent to $425.6m.

Outside the main index, Synlait Milk was unchanged at $3.507. The dairy company has completed the institutional component of its rights offer, raising about $59m. As part of its earnings announcement on Monday, the company said it planned to raise $98m in a rights offer to expand its infant formula manufacturing.