New Zealand shares fell less than some analysts feared as the local market returned from a day off and global volatility settled down from selling earlier in the week. The dual-listed Australian banks and growth stocks declined.
The S&P/NZX50 Index dropped 47.1 points, or 0.6 per cent, to 8,194.73. Within the index, 35 stocks dropped, nine rose and six were unchanged. Turnover was $219 million.
The bourse dropped 2.1 per cent on Monday and fell about 2 per cent this morning, following a global rout that started on Wall Street on Friday after strong US jobs data fuelled concerns US inflation will accelerate faster.
Markets in Europe and Asia followed suit on Monday, but US markets recovered last night pushing markets across Asia to trade higher in the afternoon.
"Overall we're not in bad shape," said Mark Lister, head of private wealth research at Craigs Investment Partners. "All the other markets are well in the green, but they all fell yesterday so they're playing catch-up in terms of a rebound.
"We started off on the back foot, down 2 per cent, but markets have got a bit more optimistic as the day has gone on largely because of that turnaround in the US markets we saw late in the sessions. At the moment it looks like you might see stability in the US overnight, but the swings have been so big that it wouldn't take much to see it go back the other way."
Lister said the upcoming earnings season, which will start on Friday when Skycity Entertainment Group reports its annual result, will "give us a more truthful read on the state of the market and the economy, rather than just what share prices are doing." SkyCity rose 0.3 per cent to $4.
CBL Corp's shares remained halted at $3.17. AM Best downgraded the insurer's issuer credit rating to 'bb+' from 'A-' and CBL is seeking to raise cash to deal with a mandated increase to its reserves from the Reserve Bank of New Zealand and Central Bank of Ireland.
CBL said the directions and discussions it has had with the RBNZ, which it told the market of on Monday, have been occurring under strict confidentiality orders prohibiting it from making any announcement to the market, but those orders have now been lifted, so it gave more detail today. The RBNZ and the CBI have issued directions about CBL and its European subsidiary's capital reserves.
"It's not going to be pretty when that re-opens," Lister said. "We've seen a profit downgrade, they're going to raise capital, they're under review from the Reserve Bank, there has been a ratings downgrade: none of that is good news. They've been in a trading halt since Monday, so they're yet to respond to all the market volatility we've had."
The worst performer today was dual-listed lender Australia & New Zealand Banking Group, down 3.3 per cent to $30.10, with Westpac Banking Corp dropping 2.9 per cent to $32.90 and Auckland International Airport falling 2.1 per cent to $6.40.
Market darlings suffered, with Synlait Milk down 1.9 per cent to $6.62, a2 Milk Co falling 1.9 per cent to $8.87, and Pushpay Holdings dropping 1.8 per cent to $3.90.
"These are all the high-flying stocks which were last year's stars and have been very strong," Lister said. "When people get a bit nervous and see volatility re-emerge, they're some of the first that people start taking profits on."
Electricity companies gained today, with Contact Energy up 0.9 per cent to $5.39, Meridian Energy rising 0.4 per cent to $2.81, and Mercury NZ up 0.3 per cent to $3.31. Lister said those stocks were seen as safe havens in volatile conditions.
Infratil gained 1 per cent to $3.13. The company, which is also the majority shareholder of Trustpower and Tilt Renewables, said it has begun a strategic review of its ownership of NZ Bus after concluding negotiations for contracts for Wellington and Auckland commuter services valued at $1.3 billion.
Outside the benchmark index, Pacific Edge gained 3.8 per cent to 41 cents. The cancer diagnostics company announced a deal with a US insurance provider network which it said will make its Cxbladder tests available to 5.5 million covered lives through its clients and payers. Cxbladder is a suite of non-invasive laboratory tests for the detection and management of bladder cancer.
Seadragon jumped 20 per cent to 0.6 cents. The shares rising on the company's forecast for earnings to improve in the current financial year with solid demand for its fish oil products.