NZX 50 gains as soft jobs cool bets on Reserve Bank hiking in December

New Zealand’s S&P/NZX 50 index outperformed most of Asia as a softer jobs report than anticipated prompted bond traders to dial back their expectations for the Reserve Bank to hike its benchmark interest rate in December, buoying rate-sensitive firms such as Stride Property, Goodman New Zealand and Precinct Properties NZ.

Stocks across Asia were generally weaker as the vote counting started in the US midterm elections, with the Democrats on track to win both the Senate and the House of Representatives and slow President Donald Trump’s policy agenda.

Blue chips Infratil, Fisher & Paykel Healthcare and Meridian Energy helped drive the NZX 50 higher in heavier trading than usual, while Auckland International Airport dipped as pushed go on raising $250 million by selling bonds to retail and wholesale investors.

And My Food Bag declined after the meal-kit company settled on sticking with its plan to grow as a listed company after tapping Cameron Partners in April to run a strategic review of the firm.

Port in a storm

The NZX 50 rose 63.19 points, or 0.5%, to 13,783.45, with 19 stocks gaining, 21 declining and 10 unchanged. The S&P/NZX 20 index advanced 0.6% to 7,558.83, with the futures contract untraded.

Turnover across the main board was $181.6 million, of which Infratil accounted for $36.3 million as the data centre investor increased 1% to $12.74.

F&P Healthcare gained 1.2% to $46.75, with a turnover of $32.9 million, while Meridian Energy climbed 2.8% to $5.53 to lead the NZX 50 higher, with $15.1 million of stock traded.

New Zealand’s stock market fared better than most of Asia, as investors were unnerved by the prospect of the Democratic party winning control of both chambers of the US Congress. When paired with a Republican president, that’s historically led to a slower pace of growth for US equity markets.

Japan’s Nikkei 225 index dropped 4.5% in late trading and South Korea’s Kospi fell 3.8%, with the Democratic wave seen as likely to impose more regulation on artificial intelligence companies. Australia’s S&P/ASX 200 index was down 0.9%, with mining stocks including BHP and Rio Tinto weighing on the benchmark.

The NZX 50 rallied as interest rates fell on Stats NZ’s weaker-than-expected labour report, with unemployment unexpectedly rising to 5.7% and job numbers shrinking 0.1%. The two-year swap rate dropped 12 basis points to 3.75%, and the yield on the 10-year government bond fell 8 basis points to 4.72%.

“The jobs number surprised economists and reinforced why the Reserve Bank’s decision last week was absolutely the right call,” said Greg Smith, investment specialist at Generate Investment Management, referring to the central bank’s pause. “There’s spare capacity in the economy; full-time work’s down, part-time work’s up, the unemployment rate went up, and wage growth was just over 2%.”

The flightless bird

The kiwi dollar fell to 55.93 US cents at 5pm in Auckland from 56.19 cents yesterday, and traded at 80.39 Australian cents from 80.48 cents.

Kelly Eckhold, chief economist at Westpac NZ, said the labour figures clouded the outlook for the kiwi if it took longer for local rates to move closer to the global norms.

“I feel very happy about our year-end target of 79 cents for the NZD/AUD rate with the risk that a recovery in the NZ dollar takes longer than currently assumed,” Eckhold said in a note.

Rate-sensitive stocks were among the day’s leaders, with Stride up 2.4% at $1.08, Goodman gaining 2.2% to $1.895 and Precinct advancing 1.5% to $1.01.

Spark New Zealand rose 2.5% to $2.04, with 4.9 million shares traded, the biggest volume on the day, while Freightways – a favoured economic bellwether on the stock exchange – increased 1.5% to $12.58.

Summerset Group Holdings fell 3.9% to $6.20, the steepest decline on the NZX 50, while Argosy Property decreased 2.4% to $1.02, and Gentrack dropped 2.4% to $4.12.

Auckland Airport dipped 0.4% to $8.42 on a turnover of $14.1 million, after the country’s major gateway said it would proceed with selling $100 million of five-year bonds to retail investors and another $150 million of floating rate bonds to wholesale investors.

Stock market operator NZX fell 1.3% to $1.50 after its monthly operating metrics showed an 8.3% decline in the value of cash trading in October, with year-to-date trading value slipping 2.1% from the prior year.

Outside the benchmark index, My Food Bag slipped 1.6% to 31.5 cents after the meal-kit company said it’s considering ways to return surplus cash to shareholders after completing a strategic review and deciding to chase growth as a listed company.

Reporting by Paul McBeth. Image from Curious News.