Kiwi holds above 59 US cts as Moody’s puts NZ credit rating on negative outlook
Wall Street remained buoyant despite oil prices climbing back above US$100 a barrel.
The New Zealand dollar held above 59 US cents as Moody’s Ratings put the nation’s Aaa sovereign credit rating on a ‘negative’ outlook as the shaky global environment threatens to squeeze the sluggish recovery and national debt continues to mount.
Brent crude oil prices rose back above US$100 a barrel as Iran fired on three ships in the Strait of Hormuz after US President Donald Trump extended the ceasefire to keep alive a resumption of peace negotiations.
Stocks on Wall Street shrugged off the Middle East conflict, with Boeing leading the Dow Jones Industrial Average higher after reporting increased March quarter sales, while the Magnificent 7 megacap stocks were all stronger ahead of Tesla’s earnings, due to land after the bell.
And Toronto stock exchange operator TMX Group is coming across the Pacific, agreeing to buy Cboe’s Australian and Canadian businesses for US$300 million, provided it gets regulatory approvals.
Storm clouds on the horizon
The kiwi dollar traded at 59.04 US cents at 7am in Auckland from 59.06 cents yesterday after Moody’s affirmed New Zealand’s credit rating, while attaching a negative outlook, saying global economic and geopolitical uncertainty heightened the risks to the nation’s fiscal track.
That environment threatens to dent already sluggish growth, with the prospect of rising interest rates potentially slowing the government’s already-delayed return to surplus.
Fitch Ratings put New Zealand’s AA-plus rating on a negative outlook last month over the government’s increasingly unwieldy debt.
The yield on New Zealand’s 10-year government bond was 4.68% at 7am, having climbed 28 basis points so far this year. Bond traders have priced in a half-percentage point increase to the 2.25% official cash rate at the Reserve Bank’s September meeting.
Brent crude oil futures remained elevated at US$101.83 a barrel at 7am as Iran fired on and seized two vessels in the Strait of Hormuz, while the US blockade remains in place as efforts to resume peace negotiations remain strained. The Polymarket prediction market is pricing in a 47% chance of a lasting truce by the end of May and 61% by the end of June.
Not fazed
Wall Street shrugged off the ongoing tensions in the Middle East, with the volatility index dipping 2% to 19.12.
“US equities are ignoring the doomsday scenario of a prolonged disruption of oil supply, with investors seemingly prepared to trade on the hope of a speedy resolution to the conflict,” Bank of New Zealand senior market strategist Jason Wong said in a note.
The Dow rose 0.4% and the S&P 500 advanced 0.8% as investors turn their focus to corporate earnings. Boeing led the Dow higher, climbing 5.2% in late trading after narrowing its March quarter loss on increased aircraft sales.
The tech-heavy Nasdaq Composite climbed 1.2% with Tesla poised to report after the bell, kicking off the megacap Mag7 companies reporting. The Roundhill Magnificent 7 exchange traded fund was up 1.5%.
Europe was more muted, with the UK’s FTSE 100 down 0.2% and Germany’s DAX declining 0.3%, while France’s CAC 40 dropped 1%.
Australian futures are pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman.
Local data today include Statistics New Zealand’s productivity and research and development figures, while stock exchange operator NZX is holding its annual meeting in Auckland.
The NZX was rumoured to have been a potential bidder for the Cboe Australia business across the Tasman, but has missed out as Toronto’s TMX agreed to buy the global market operator’s Australian and Canadian arms for US$300 million, subject to regulatory approvals. The Australian Securities and Investments Commission said it will seek to expedite its assessment of the transaction.
