NZ dollar falls as Reserve Bank rate cut keeps investors on edge; Wall St slides

The New Zealand dollar fell against a stronger greenback ahead of the Reserve Bank’s rate review today, with markets still pricing in an outside chance of a half-percentage point cut while economists lean towards a 25 basis point reduction.

Meanwhile, stocks on Wall Street were broadly weaker as gold hit US$4,000 an ounce for the first time, and concerns about Oracle’s margins on its fast-growing cloud business typified a malaise among tech companies.

That didn’t spill over to Sharesies favourite Rocket Lab, which is on track to extend its rally for a seventh day, having crossed the US$60 mark for the first time.

And across the Atlantic, European markets were largely unchanged as an improving outlook for luxury giants LVMH and Kering was offset by a soft session for healthcare stocks.

The first cut is the deepest

The kiwi dollar fell to 58.04 US cents at 7am in Auckland from 58.31 cents yesterday ahead of the Reserve Bank’s policy review, which economists predict will fall 25 basis points to 2.75%. Still, markets are pricing in an outside chance of a steeper 50 point reduction after a sombre business opinion survey yesterday was seen as indicating soggy economic activity is persisting after a soft June quarter gross domestic product reading.

“Uncertainty over how the RBNZ will interpret the recent soft Q2 GDP outturn and incorporate this into its updated forecasts, alongside other recent data, has contributed to the finely balanced market expectations,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Either decision will likely drive a market reaction in short rates and the NZ dollar.”

Market sentiment was generally softer in the Northern Hemisphere session with gold prices hitting a record – futures were up 0.8% at US$4,007 an ounce at 7am in Auckland – and the CBOE’s volatility index up 5% at 17.18.

Stocks on Wall Street are on track to snap a seven-day rally, with the S&P 500 down 0.5% in late trading and the Nasdaq Composite falling 0.8%.

The skinny of things

Tech stocks were broadly weaker, with Oracle down 3% after The Information reported the software giant lost US$100 million last quarter renting Nvidia’s Blackwell chip and that its increasingly important cloud computing unit is operating skinny margins.

Advanced Micro Devices extended its gains, recently up 3.1%, as it continued to be buoyed by its supply deal with OpenAI.

Local favourite Rocket Lab is on track for a seventh straight gain, recently up 5.5% at US$61.74, as investors remain upbeat about its expanded launch contract with Japan’s Synspective.

Alaskan miner Trilogy Metals more than tripled after US Secretary of the Interior Doug Burnum said the federal government will take a 10% stake in the firm as part of a development plan for the frontier state.

Across the Atlantic, stock markets were flat with the UK’s FTSE 100 index nudging up 0.1% while German and French benchmarks were marginally higher, as gains for luxury giants LVMH and Kering were offset by declines in health stocks such as Bayer and banks.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman.

There’s no other major local data scheduled for today.

Reporting by Paul McBeth. Image from Curious News.