The kiwi dollar fell against its trans-Tasman counterpart after the Reserve Bank of Australia blindsided investors in keeping the cash rate unchanged, saying earlier cuts have given it time to wait for more data showing inflation pressures have abated before lowering the rate further.
New Zealand’s S&P/NZX 50 index rallied into the close after the surprise RBA decision, with interest rate sensitive sector such as property stocks and energy companies broadly higher ahead of the Reserve Bank of New Zealand’s policy review on Wednesday, which is widely expected to keep rates unchanged.
US President Donald Trump’s latest edicts on tariffs weighed on logistics firm Mainfreight, while infant formula exporter a2 Milk Co posted the biggest decline on the local bourse.
KMD Brands led the NZX50 higher after Forsyth Barr analysts said there’s medium-term value in the retailer, but plenty of short-term challenges to delay any re-ratings in the foreseeable future.
Surprise, surprise
The Reserve Bank of Australia kept its target cash rate at 3.85%, surprising investors who’d almost fully-priced in a quarter-point cut in the lead-up to the review.
The central bank’s board voted six-three in favour of staying put, saying recent cuts gave it space to wait for more data showing inflation was on track to reach the 2.5% level on a sustainable basis before making further reductions.
“The board continues to judge that the risks to inflation have become more balanced and the labour market remains strong,” the RBA’s board said in a statement. “Nevertheless, it remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply.”
The kiwi dollar fell to 91.99 Australian cents at 5pm in Auckland from 92.40 cents at 7am and 92.52 cents yesterday. Australia’s S&P/ASX 200 index was waxing and waning in the lead-up to the announcement, and was down 0.3% in late trading.
The RBA’s decision comes ahead of New Zealand’s Reserve Bank review on Wednesday, which is expected to keep the official cash rate at 3.25%. The kiwi traded at 60.18 US cents from 60.09 cents yesterday.
New Zealand’s NZX50 climbed 94.07 points, or 0.7%, to 12,859.02, rallying after the RBA’s surprise decision. There were 36 gainers on the benchmark, with 12 decliners, and two companies unchanged, including newcomer Napier Port at $3.20.
Turnover across the main board was $170.7 million.
Touchy sectors
Rate sensitive sectors paced the index higher, with energy and property stocks broadly stronger. Stride Property Group rose 4.2% to $1.24, Goodman Property Trust advanced 3.5% to $2.05, and Precinct Properties NZ gained 3.3% to $1.26, while Meridian Energy was up 3.1% at $6, Genesis Energy increased 2.2% to $2.35, and Mercury NZ climbed 1.8% to $6.25.
Kiwi Property Group was the most heavily traded stock on a volume of 3.7 million, rising 1.6% to 96 cents, while Spark New Zealand slipped 0.4% to $2.50 on a volume of 3.1 million.
KMD Brands led the NZX50 higher, climbing 5.8% to 27.5 cents after Forsyth Barr analysts affirmed its ‘neutral’ rating and kept their target price at 34 cents, while noting medium-term value in the retailer if it can overcome some immediate challenges.
Summerset Group Holdings gained 3% to $12 after reporting growth in new sales and resales of occupation rights in the June quarter, and saying it’s on track to build between 650 and 730 new homes this year.
Wall Street had set a soft tone for the antipodean trading day after US President Donald Trump unleased new tariffs on various trading partners as he pushed out the reprieve on the Liberation Day regime until the end of July.
Infant formula exporter a2 Milk Co posted the biggest decline on the NZX50, falling 3.7% to $8.38
Logistics group Mainfreight fell 2.2% to $66, while Auckland International Airport slipped 0.7% to $7.56 and Port of Tauranga decreased 0.1% to $7.15.
Reporting by Paul McBeth. Image from David Clode on Unsplash.
