US-Iran tensions dent strong week for NZX50
Exporters a2 Milk and Sanford were the top gainers with the kiwi on track for its worst week since November.
New Zealand’s S&P/NZX 50 index capped off a strong week on a sour note, as the prospect of a US military strike against Iran sapped investors’ appetite for riskier assets, stoking a rally in gold prices and bonds and pushing up oil prices.
Meanwhile, Reserve Bank governor Anna Breman continued to press the message that the economy has scope to recover while inflation returns to the central bank’s target in an increasingly volatile global environment.
The a2 Milk Co and Sanford notched up the biggest weekly gains on the NZX50 as a softer kiwi dollar bolsters the value of their export receipts, with the infant formula providing an extra tailwind to its strong first-half result.
The domestic earnings season continued today with lines company Vector’s dividend coming in lighter than analysts had expected, while property developer Winton Land continued to hold back cash distributions in the tepid housing market.
That was unexpected
The NZX50 dropped 135.68 points, or 1%, to 13,308.52, with 30 stocks declining, 14 gaining, and six unchanged. Turnover across the main board was $178 million, of which Auckland International Airport accounted for $32.3 million as it rose 1.7% to $8.88.
The Friday slump slowed the NZX50’s weekly gain to 0.8%, with exporters leading the index as a weaker currency boosted the value of their export receipts when converted back to New Zealand dollars. The a2 Milk Co slipped 2.6% $11.17 on Friday, taking its weekly gain to 12%, while Sanford’s 3.2% daily gain to $7.74 took its weekly advance to 6%.
The index snapped a two-day rally on Friday, joining a broadly softer tone across Asia amid reports US President Donald Trump is considering a military strike on Iran to force the Middle Eastern nation into a deal over its nuclear programme.
Bonds rallied, with the yield on New Zealand’s 10-year government bond down 4 basis points at 3.98% and yields were lower across a range of NZX-listed corporate debt, while gold futures increased 0.3% to US$5,010 an ounce and Brent crude oil futures increased 0.4% to US$71.95 a barrel.
The kiwi dollar dropped to 59.47 US cents at 5pm in Auckland from 59.75 cents yesterday and is on track for a 1.5% decline in its steepest fall across a week since early November.
The local currency typically loses its sheen in heightened periods of volatility, and was pushed down further by the Reserve Bank’s Wednesday policy review in keeping the official cash rate at 2.25% and governor Anna Breman expecting to keep the rate at that level for the rest of the year.
Crystal ball gazing
Breman delivered a speech to a business audience in Christchurch today reiterating that message, saying the central bank is forward-looking in gauging where it thinks inflation will go, and is confident the nation’s uneven recovery won’t fuel price rises.
“We had anticipated a cautiously optimistic view from the RBNZ on the economic recovery that culminated in a signalled first shift in the OCR towards the neutral zone right at the end of 2026,” Westpac NZ chief economist Kelly Eckhold said in a note “The RBNZ’s messaging – which was notably much clearer than has sometimes been the case in the past – met those expectations.”
Eckhold noted the Reserve Bank’s pessimistic view on the housing market, with prices set to be a drag on household spending.
That showed up in Winton Land’s first-half result, with the property developer saying it won’t pay dividends for a third year with the housing market still struggling. The firm narrowed its net loss, even as revenue sank 60%, falling well short of Forsyth Barr’s expectations. The shares fell 2.6% to $1.885, while building materials firm Fletcher Building declined 2.8% to $3.53.
Lines company Vector also reported today, with underlying first-half earnings climbing 19%, although the 12.5 cents per share dividend fell short of analysts’ predictions under the firm’s new dividend policy. The shares declined 2% to $4.83.
Ebos Group led the local market lower, falling 4% to $24.40 on Friday, while Gentrack dropped 4% to $7.20. Sky Network Television, which this week said it won’t keep its long-held HBO broadcasting rights, dropped 3.7% to $3.13.
Sanford posted the biggest gain on NZX50 on Friday, while Fonterra Shareholders’ Fund units climbed 1.9% to $8.18 after the dairy exporter raised its forecast farmgate milk price and said it will pay a special dividend from the earnings of its soon-to-be-divested Mainland consumer business.
Trading of Fonterra Cooperative Group’s farmer-owned shares was halted due to an error by the stock exchange operator. NZX shares were unchanged at $1.42.
Outside the benchmark index, shares of Pacific Edge were halted while a committee hearing takes place. The result will be key to the bladder cancer test maker regaining its Medicare coverage in the US.
Reporting by Paul McBeth. Image from Curious News.
