Sharemarket lacklustre as investors wary of Omicron, higher interest rates

Tuesday, 18 January 2022

The sharemarket closed flat in quiet trading as investors mulled the potential impact of an Omicron outbreak and higher interest rates.

The benchmark S&P/NZX50 Index edged up 0.06 per cent, or 7.563 points, to 12,814.46 on Tuesday.

Trading was light with United States markets closed on Monday for Martin Luther King Day.

“It’s a very slow day,” said Craigs Investment Partners adviser Peter McIntyre. “Volume through the market is very slow as well.”

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Investors are cautious as they eye the potential spread of Omicron, and higher interest rates loom.

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January tended to be a quiet month as brokers returned from holiday and companies were preparing their financial results for the period to December 31, which they would report to the market in February.

“We are starting to see a few companies advising the market of when they are going to report with those either half-year earnings that end in December or full-year that end in December,” he said.

A report published on Tuesday showed business confidence fell sharply in the three months to the end of December. The New Zealand Institute of Economic Research survey found a net 34 per cent of firms expected business conditions to deteriorate, which was an increase from only a net 11 per cent expecting worse conditions in its previous survey.

“We are trading cautiously,” McIntyre said. “People are more pessimistic out there as we await Omicron to spread throughout New Zealand.”

Prime Minister Jacinda Ardern said that Omicron’s spread in the community is “inevitable”, as she prepared to get her third dose of the Covid-19 vaccine on Monday.

Investors were also nervously awaiting the results of a Federal Reserve meeting next week when the US central bank could raise interest rates, McIntyre said.

“The market is coming to grips with the fact that there will be interest rate increases,” McIntyre said. “The market is pretty comfortable with two to three interest rate increases over 2022, it’s just how quickly they go or how aggressive they are.”

Among the top stocks traded by value, Fisher & Paykel Healthcare slipped 0.9 per cent to $31.40, Spark gained 2 per cent to $4.60, and Auckland International Airport fell 1.4 per cent to $7.655.

IkeGPS surged 8.2 per cent to 79 cents after announcing it had renewed a contract with a communications customer in the US, which was worth about $4 million over the next 12 to 18 months.

Employment and financial technology firm PaySauce rose 1.6 per cent to 32 cents after reporting its annual recurring revenue in the year to December 2021 had increased 67 per cent, while its quarterly revenue was up 22 per cent. The company attributed the growth to higher customer numbers and higher average processing fees following a price increase in the quarter.

Asian shares were mostly higher on Tuesday in the absence of big market-moving news following the national holiday in the US.

The Bank of Japan wrapped up a two-day policy meeting with no major changes. The benchmark interest rate remains at a longstanding minus 0.1 per cent.

Japan's central bank's super-easy monetary policy had been expected to stay unchanged for the time being, as the nation grapples with surging cases of Covid-19 infections set off by the Omicron variant.

Benchmarks in Japan, China and Australia rose in early trading, but shares fell in South Korea. US futures edged higher.

- With AP