Aussie banks weigh on NZX, ASX as bond yields creep higher; Mercury sheds dividend

The New Zealand and Australian stock markets followed Wall Street lower as the big four banks weighed on the trans-Tasman bourses, with Westpac Banking Corp leading the S&P/NZX 50 index lower.

Meanwhile, the spike in European government bond yields continued into the Asian trading session, knocking ASX-listed tech stocks in particular given the link between valuations and interest rates. Xero led the S&P/ASX 200 index lower.

Bureau of Statistics figures showed the Australian economy grew at a faster clip in the June quarter than economists predicted, sapping expectations for the Reserve Bank of Australia to keep trimming the cash rate.

And New Zealand’s stock market operator, NZX, announced a return to monthly growth in trading values in August, albeit with slowing in the pace of expansion in the year-to-date.

Dark arts of fixed income

The NZX50 snapped a four-day gain, falling 58.35 points, or 0.4%, 13,074.81, with 21 stocks declining, 24 gaining, and five unchanged. Turnover across the main board was $127.7 million, of which Meridian Energy accounted for $14.1 million as it rose 0.8% to $5.90 and Fisher & Paykel Healthcare accounted for $11.1 million, falling 0.1% to $36.85.

Stock markets across Asia followed Wall Street lower as US trading rooms got back to work from their long holiday to find 30-year government bond yields in Europe at multi-year highs, and gold prices breaking new ground.

The yield on New Zealand’s 10-year government bond rose 5 basis points to 4.49% at 5pm in Auckland, while Australia’s equivalent was up 8 basis points at 4.45%.

The ASX200 dropped 1.7% in late trading, with New Zealand-founded accounting software firm Xero leading the Australian benchmark lower as tech companies keenly felt the brunt of the grumbling bond markets. Block and WiseTech were also weaker.

In New Zealand, Serko fell 2.7% to $2.53, while Gentrack gained 0.3% to $10.03 and Vista Group International advanced 1.3% to $3.16.

Australia’s big four banks also weighed, with the dual-listed Westpac leading the NZX50 lower, falling 3.1% to $41.45 after UBS analysts cut their rating on the stock to ‘neutral’ from buy. ANZ fell 2% to $36.50.

Mercury NZ was a drag on the benchmark, falling 2.2%, or 15 cents, to $6.57 after shedding rights to a 14.4 cent dividend. Vital Healthcare Property Trust slipped 0.7%, or 1.5 cents, after shedding rights to a 2.4 cent dividend.

Still lucky

Australian data today showed the Lucky Country’s gross domestic product grew 0.6% in the three months ended June 30, faster than the 0.5% pace predicted, and sapping expectations for the RBA to cut the target cash rate.

“Today’s accounts (including revisions) paint a firmer picture of the Australian consumer with incomes and spending both showing steady recoveries, albeit with what are likely to be some one-off supports in the latest quarter,” Westpac economist Pat Bustamante said in a note. “That said, it will still take time for businesses to respond and invest more.”

The kiwi dollar fell to 89.88 Australian cents at 5pm in Auckland from 90.02 cents yesterday, and fell to 58.61 US cents from 58.85 cents.

Meanwhile, local companies with Australian exposure rallied, with retail chain KMD Brands posting the biggest gain on the day, up 4.2% at 25 cents, while Hallenstein Glasson Holdings rose 4% to $9.10.

Tourism Holdings rose 2.5% to $2.48, Fletcher Building climbed 1.5% to $3.31 on the day's biggest volume of 3 million, and SkyCity Entertainment Group increased 1.4% to 71 cents.

NZX increased 0.7% after the stock market operator said the value of cash trading rose 4.9% in August from a month earlier, with trading in the year to date up 22% at $27.82 billion. That was slightly slower than the 25% year-to-date pace in July.

Vector increased 0.2% to $4.62 after hiring Rio Tinto’s Tiwai smelter boss Chris Blenkiron as its new chief executive, starting in December.

Reporting by Paul McBeth. Image from Curious News.