RBNZ rate hike expected as US tech knocked

New Zealand’s Reserve Bank is expected to raise the official cash rate to 2.5% at today’s policy review, although the conviction in that increase has wavered in recent weeks, with some economists predicting another pause to let the loose conditions continue to support wavering economic recovery.

That comes as investor sentiment turned on Wall Street, with semiconductor and chip stocks such as Intel and Advanced Micro Devices sliding after Samsung Electronics’ surging quarterly profits failed to meet hyped expectations.

Space stocks tumbled as SpaceX joined the Nasdaq 100, despite the vertically integrated satellite, rocket launch and artificial intelligence conglomerate attracting bullish valuations from various research houses.

And New Zealand infrastructure investment manager Morrison will bring Japan’s Sumitomo Mitsui Trust Bank onto its share register as a minority investor as part of a wider deal to become the Japanese lender’s preferred global infrastructure manager.

Higher rates?

Bond traders were pricing in a 72% chance the Reserve Bank would raise the OCR at today’s meeting, with most economists agreeing that governor Anna Breman and the monetary policy committee should start taking the foot off the accelerator now, rather than wait until September.

The kiwi dollar traded at 56.82 US cents at 7am in Auckland from 56.95 cents yesterday.

“Assuming the Bank delivers, the accompanying messaging will be important for rates markets and the currency,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “We expect the RBNZ to retain a tightening bias while acknowledging the need to move policy closer to neutral from its currently accommodative setting.”

Meanwhile, minutes to the Federal Reserve’s June meeting were a key focus for investors in unpicking the US central bank’s hawkish tilt in chair Kevin Warsh’s debut.

Stocks on Wall Street were weaker as souring investor sentiment carried through from Asia after Samsung’s 19-fold surge in quarterly profit failed to meet hyped expectations. The tech-heavy Nasdaq Composite dropped 1.2% in late trading, with chipmakers and semiconductor firms among the laggards.

Still, SK Hynix’s US$28 billion US initial public offering was said to be oversubscribed by multiple times, and Amazon’s US$25 billion bond offering was attracting less demand than a previous debt sale in March.

And China’s DeepSeek was reportedly seeking to develop its own chip to power its AI systems.

A new valuation

Greg Boland, market strategy consultant at Moomoo, said investors were revisiting their valuations of semiconductor firms after the sector’s strong rally.

“Despite today's weakness, the longer-term artificial intelligence investment theme remains intact, with investors now looking ahead to earnings and capital expenditure guidance from Microsoft, Meta and Amazon,” Boland said in a note.

SpaceX dropped 6.1% to US$150.72 in late trading as it joined the Nasdaq 100 composite and received favourable coverage from analysts, while local favourite Rocket Lab tumbled 10% to US$83.825.

The S&P 500 was down 0.6% in late trading and the Dow Jones Industrial Average declined 0.4%.

Brent crude oil futures jumped 5.8% to US$76.17 at 7.30am in Auckland amid reports the US Treasury Department revoked a waiver on Iranian trade sanctions in response to attacks on tankers in the Strait of Hormuz.

Across the Atlantic, stock markets were broadly weaker, with Germany’s DAX down 1.4% and France’s CAC 40 slipping 0.5%, while the UK’s FTSE 100 edged up 0.1%.

French National Rally leader Marine Le Pen said she intended to run for president in next year’s election after an appellate panel upheld her conviction for misusing public funds

Marine Le Pen, France’s far-right leader for two decades, intends to make her fourth presidential run even after an appellate panel ordered her to wear an electronic-monitoring device when it upheld her conviction for misusing public funds, while reducing her five-year electoral ban to 45 months, of which she had 15 months remaining.

And UK leader of the Reform party Nigel Farage said he would resign from parliament and run for re-election in a bid to quell criticism of his financial affairs.

Meanwhile, Prince Harry lost his lawsuit against the publisher of the Daily Mail over claims the UK tabloid engaged in phone hacking and unlawful information gathering.  

The downbeat tone is set to carry through to the antipodes, with Australian futures pointing to a 0.1% decline for the S&P/ASX 200 index when trading opens across the Tasman.

Dairy companies Fonterra Shareholders’ Fund and Synlait Milk will be in view today after milk prices fell at the latest Global Dairy Trade event, with the GDT price index down 4.9% with an average winning price of US$3,793 a tonne. Whole milk powder prices fell 4.4% to US$3,425/tonne.

Stride Property is holding its annual meeting in Auckland today, while a2 Milk Co and Mainfreight go ex-dividend.

Reporting by Paul McBeth. Image from Curious News.