Exporters in focus as NZ dollar sinks to 7-month low

The New Zealand dollar fell to a seven-month low against the greenback as growing expectations the Federal Reserve would hike its benchmark rate this year buoyed the greenback, providing a cushion for local exporters such as Fisher & Paykel Healthcare and Skellerup Holdings.

Stocks on Wall Street were knocked as investors continued to be unnerved about intentions for massive spending on artificial intelligence infrastructure, with chipmaker Nvidia weighing on the Dow Jones Industrial Average and Micron Technology sinking ahead of its quarterly result.

Carnival set a soft lead for local travel and tourism operators such as Tourism Holdings with the cruise operator’s bookings disrupted by the Middle East conflict.

Meanwhile, Australian futures are pointing to a positive start to the day for the ASX, while on this side of the Tasman, Eroad hosts shareholders at its annual meeting where Ampfield Management will agitate for change.

Relative rates

The kiwi dollar dropped to 56.65 US cents at 7am in Auckland from 56.93 cents yesterday, hitting its lowest level against the greenback since November as bond traders firm up bets that the Fed will raise the federal funds rate this year. The yield on New Zealand’s 10-year government bond was at 4.43%, below the 4.5% yield on its US equivalent.

“Weaker risk appetite evident through the NZ trading session yesterday extended overnight,” Bank of New Zealand senior market strategist Jason Wong said in a note. “Global equity markets are weak, global rates are lower, and the US dollar is broadly stronger.”

Stocks on Wall Street were broadly weaker as fears about the expansive AI spending programme persisted. The CBOE volatility index, known as Wall Street’s fear gauge, jumped 14% to 19.67, reflecting the increasing nerves.  

The Dow Jones Industrial Average was largely flat as Nvidia’s decline offset gains for the likes of International Business Machines, Merck and Johnson and Johnson, while the tech-heavy Nasdaq Composite sank 2%. The S&P 500 was down 1.3% in late trading.

Bitcoin dropped 3.5% to US$62,157, while crypto treasury firm Strategy sank 4.1%, putting it on track for its lowest close in more than two years.

Markets were also weak across the Atlantic, with the UK’s FTSE 100 down 0.1%, Germany’s DAX falling 1% and France’s CAC 40 sliding 0.7%.

More defensive

Greg Boland, market strategy consultant at Moomoo, said semiconductor firms weighed on the US markets, with investors shifting into more defensive sectors such as healthcare, consumer staples, and telecommunications.

“With oil prices falling, inflation concerns easing and progress being made in the Middle East, the local market appears set for a firmer start despite Wall Street's technology turbulence,” Boland said in a note.

Australian futures are pointing to a 0.5% gain for the S&P/ASX 200 index when trading opens across the Tasman. Brent crude oil futures fell 1% to US$77.15 a barrel at 7am.

Local tourism operators got a weak lead from cruise operator Carnival, which said extreme geopolitical volatility disrupted bookings in the latest quarter, and predicted a softer current quarter as expensive fuel squeezed margins.

Tourism Holdings had a large volume of shares change hands yesterday, and is currently under due diligence from suitor BGH Capital and the Trouchet family, who’ve made an indicative offer of $3.10 a share, a premium to the current price of $2.56.

No local data are scheduled for today, while Eroad’s annual meeting will showcase activism by the transport hardware and software firm’s biggest shareholder, Ampfield, which wants to oust the board. The New York hedge fund acknowledged this week that it probably didn’t have the numbers to roll the board.

Reporting by Paul McBeth. Image from Adam Nir on Unsplash.