NZX 50 snaps two weeks of gains as Middle East conflict casts a chill

New Zealand’s S&P/NZX 50 index snapped two weeks of gains as renewed conflict in the Middle East ratcheted up oil prices, weighing on the likes of Auckland International Airport and Air New Zealand, while Summerset Group Holdings led the benchmark lower across the week after data showed the housing market remained subdued.

That was despite a daily rally on Friday, with the NZX 50 one of the few bourses across Asia to gain with SkyCity Entertainment Group jumping on the sale of a surplus Auckland building going unconditional in unusually heavy trading.

The kiwi dollar was on track for its third weekly gain against the greenback as bond traders firmed up their bets on the Reserve Bank to hike the official cash rate two more times this year, while economists finalised their forecasts for June inflation data next week, picking consumer prices rose at a faster pace than the central bank’s projection.

And former finance minister Bill Birch has died, aged 92.

Oil in the works

The NZX 50 rose 79.9 points, or 0.6%, to 13,694.68, with 33 stocks gaining, 13 declining, and four unchanged, trimming the weekly decline to 0.7%.

Summerset posted the steepest decline across the week, down 6.9% after Real Estate Institute of New Zealand data showed the local housing market remained subdued, with fewer sales and the house price index down from a year earlier.

The renewed conflict in the Middle East pushed Brent crude up 12% so far this week, weighing on travel companies, with Auckland International Airport down 4% this week and Air New Zealand declining 4.6%, while travel software developer Serko slid 6.2%.

Meanwhile, SkyCity posted the biggest gain for the week, up 6.5%, while Vulcan Steel advanced 4.2%.

The S&P/NZX 20 futures contract for September was unchanged at 7,645 with no lots traded on the day, while the NZX 20 climbed 0.6% to 7,737.34 on Friday.

Turnover across the main board was $144.2 million, of which Spark New Zealand accounted for $12.8 million as it fell 1.4% to $1.825, its third daily decline.

New Zealand’s NZX 50 was one of the few markets to gain on Friday – along with benchmarks in India, Malaysia and Indonesia – as investor sentiment remained chilly on the artificial intelligence trade. South Korea’s Kospi sank 6.4% in late trading and Japan’s Nikkei 225 tumbled 5.3%, while Australia’s S&P/ASX 200 index was down 0.8%.

“The chip stocks have done seriously well and now there’s some serious profit-taking on that front,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “Futures are still considerably lower at this stage, and I would expect it’s going to be choppy trading in the US overnight.”

The house always wins

SkyCity led the NZX 50 higher on Friday, climbing 6.5% to 57 cents after the casino operator said its $74.5 million sale of the 99 Albert Street office building in Auckland went unconditional. The stock was the most heavily traded on the day, with 13.7 million shares changing hands, of which 10.8 million moved in three trades at 56.5 cents a share.

Among the day’s other gainers, Gentrack rose 3% to $3.74, Property for Industry climbed 2.6% to $2.39 and Investore Property advanced 2.4% to $1.09.

Briscoe Group posted the steepest decline on the day, down 2.4% at $4.81, while Summerset slipped 2.2% to $8.15.

The kiwi dollar traded at 58.34 US cents at 5pm in Auckland from 58.48 cents yesterday and was on track for a 1.3% weekly gain against the greenback, with the yield on New Zealand’s 10-year government bond rising 1 basis point to 4.66%, 11 basis points above its US equivalent.

Statistics New Zealand data showed a sharp jump in petrol and diesel prices in June from a year earlier and steep increases for gas and electricity prices. Bank economist teams firmed up their forecasts for next week’s June quarter consumers price index data, with ANZ and ASB Bank predicting a 4% and Westpac NZ forecasting 4.1%. The Reserve Bank’s forecast is for annual inflation of 3.9%.

Miles Workman, a senior economist at ANZ, said the central bank was more concerned about the rising fuel prices spilling over into other parts of the CPI basket, and that the June data probably won’t provide much insight into that dynamic.

“However, a sharp rise in the share of the basket running above key thresholds (for example, more than 5%) would suggest the fuel shock is being passed through,” Workman said in a note. “The question then becomes how much firms pass on any fuel price declines over coming quarters, assuming fuel prices remain contained – which is looking like a bigger assumption by the day.”

And prime minister Christopher Luxon was among those paying tribute to former finance minister Bill Birch, who died today. Birch was a key minister in Jim Bolger’s and Jenny Shipley’s administrations in the 1990s and was at the centre of Robert Muldoon’s ‘Think Big’ projects in the late-1970s.

Reporting by Paul McBeth. Image from Curious News.