NZX50 sinks 3.1% as oil surges past US$100/bbl; Air NZ hits 17-year low

New Zealand’s S&P/NZX 50 index dropped the most in a day in almost a year as surging oil prices sent stock markets reeling across Asia and pushed up bond yields as traders start betting the Reserve Bank and other central banks will have to raise interest rates to quell any inflationary impulse from the increase in fuel prices.

Air New Zealand tumbled to its lowest level since 2009 on an adjusted basis as the national carrier was among those facing hefty increase in fuel costs, with fishing group Sanford and Tourism Holdings also at the bottom of the leaderboard.

Vector was the only company on the NZX50 to stay out of the red, with the lines company unchanged on the day.

Meanwhile, prime minister Christopher Luxon said New Zealand’s government is closely watching the impact of the Middle East conflict on oil prices and that cabinet has set up an economic oversight group chaired by finance minister Nicola Willis to keep on top of those issues.

Falling fast

The NZX50 sank 420.52 points, or 3.1%, to 13,098.83 in its biggest one-day decline since April 7 last year when the world was rocked by US President Donald Trump’s tariff regime. Within the index, 49 stocks fell and just one was unchanged. Turnover was $132.6 million across the main board, with Auckland International Airport accounting for $14.6 million as the national gateway dropped 4.4% to $8.36.

Stock markets across Asia were jolted by the spike in oil prices, with Brent crude futures up 25% at US$116.13 a barrel at 5pm in Auckland, having hit a four-year high, as Kuwait and the United Arab Emirates joined Iraq in throttling back their production due to storage pushing up against capacity due to the freeze in shipping through the Strait of Hormuz.

Separately, Iran named Mojtaba Khamenei to succeed his father, Ayatollah Ali Khamenei, as supreme leader of the Islamic Republic in a repudiation of President Trump’s desire to be involved in picking the new leader.

Greg Boland, a market strategy consultant for trading platform MooMoo New Zealand, said longer-dated oil futures hadn’t jumped as aggressively as their near-term contracts.

"If you thought it was going to be a move for a long time then those contracts would be a lot higher,” Boland said. “The forward curve gives an indication it’s going to be over some time soon.”

Japan’s Nikkei 225 tumbled 6.3% in late trading and Hong Kong’s Hang Seng slid 2.6%, while Australia’s S&P/ASX 200 index dropped 3.3%, with even energy explorers and producers such as Santos, Beach Energy and Woodside Energy weren’t enough to stem the decline.

Inflating expectations

Government bonds were sold off, pushing yields higher, as traders cooled their expectations for the Federal Reserve to cut interest rates and brought forward predictions for central banks such as New Zealand’s Reserve Bank to raise their rates.

The yield on New Zealand’s 10-year government bond jumped 20 basis points to 4.69% at 5pm in Auckland. The kiwi dollar fell to 58.70 US cents at 5pm in Auckland from 59 cents at 7am and 59.11 cents last week.

Air New Zealand led the NZX50 lower, sinking 7.8% to 47 cents on a volume of 3.7 million shares, the most for the day. The national carrier fell as low as 46 cents, nearing the record low on an adjusted basis set in March 2009, during the depths of the global financial crisis recession, albeit when Brent crude had tumbled to the mid-US$40s a barrel.

“Jet fuel prices are going to go through the roof and if you look across the economy, there’s the potential to add a couple of percentage points to inflation,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene.

Fisher group Sanford tumbled 5.6% to $7.21, while rental campervan operator Tourism Holdings dropped 5.5% to $2.40, Napier Port Holdings declined 4.9% to $3.50 and import terminal operator Channel Infrastructure declined 4.9% to $2.74.

Fisher & Paykel Healthcare, the country’s biggest listed company, fell 4.8% to $38.

Vector was the only company in the top 50 benchmark to stay out of the red, ending the session unchanged at $4.70.

Ebos Group fell 2.2% to $22.49 after being dropped from the ASX200 index from March 23, while Santana Minerals declined 1.9% to $1.015 after being added to Australia’s All Ordinaries Index from March 23.

Rakon slipped 0.3% to $1.455 after suitor Bourns extended its takeover offer at $1.55 a share to close on April 13, having received acceptances of almost 65% so far.

AFT Pharmaceuticals was unchanged at $3.50 after the Court of Appeal dismissed an application by PBL Solutions seeking a share of profits earned from topical cream Pascomer to treat Port Wine Stains.

And prime minister Luxon today again played down recent weak polling at his weekly post-cabinet press conference, while standing up a cabinet group to oversee the impact of the Middle East conflict, to be chaired by finance minister Willis.

Reporting by Paul McBeth. Image from Will Waters on Unsplash.