Sharemarket falls as investors fret over inflation, growth, interest rates

Wednesday, 27 April 2022

The sharemarket fell to its lowest level in 19 months, following a decline in United States markets, driven by worries about how the war in Ukraine is pushing up energy prices and adding to inflation.

The benchmark S&P/NZX 50 Index dropped 0.7%, or 86.791 points, to 11,726.39 on Wednesday, its lowest level since September 2020. That followed a 0.8% drop on Tuesday.

US benchmarks were weighed down by sharp declines in pricey tech stocks that took the Nasdaq to its worst drop since September 2020. The S&P 500 fell 2.8% with 95% of its stocks losing ground. The Dow Jones Industrial Average shed 2.4% and the Nasdaq tumbled 4%.

“The New Zealand market is down today following on from the US last night,” said Hamilton Hindin Greene investment advisor Grant Davies. “It’s a broad-based sell-off.

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Investors are concerned about rising inflation, lower growth and higher interest rates.

“There are concerns around growth as we have seen a higher oil price as the Russians play with the gas valve in Europe at the moment,” he said.

Poland and Bulgaria have said Russian energy firm Gazprom had warned it would stop supplying gas to “unfriendly countries” that refused to pay in roubles. Both countries have refused to pay in the Russian currency, as demanded by Russian President Vladimir Putin.

The price of benchmark US crude oil rose 3.2% on Tuesday while Brent Crude, the international standard, rose US83 cents to US$105.82 a barrel.

There was also concern about the inflationary and trade impacts of Indonesia’s plan to restrict exports of palm oil, Davies said.

Indonesia on Friday announced plans to ban some palm oil exports to bring down local prices of cooking oil to help consumers. Indonesia is the world’s largest exporter of palm oil, which is widely used in many supermarket products.

“The market expects inflation to be higher and that also flows through to interest rates, and higher interest rates coupled with the higher inflation is a headwind for the market,” Davies said.

Australian data released on Wednesday showed annual inflation was running at 5.1% in the first quarter, compared with 6.9% in New Zealand over the same period.

Local tech stocks tracked their overseas peers lower. Pushpay fell 3.1% to $1.24, after soaring 24% on Tuesday when the digital payment service for churches said it had been approached by potential bidders. Cinema software company Vista Group slipped 0.6% to $1.79, travel software company Serko slid 0.8% to $4.80, and transport fleet data company Eroad dropped 1.3% to $3.

Z Energy recorded the biggest trading on the market by volume and value. Trading in the fuel retailer will be suspended at the close of trading on Thursday in preparation for Australian petrol company Ampol’s $1.97 billion takeover after the High Court approved the deal.

Holders of Z Energy shares at 7pm on May 3, the scheme record date, would be entitled to receive $3.782 per Z Energy share in cash, which was expected to be paid on May 10. The shares closed down 0.3% at $3.77.

Shareholders who did not want to participate in the scheme have to sell their shares before the close of trading on Thursday, the company said.

Z Energy shares will be de-listed from the New Zealand and Australian stock exchanges at the close of trading on May 10.

New Zealand Oil & Gas dropped 5.8% to 49 cents after announcing plans to raise $25 million for investment in its energy assets by selling new shares in a rights issue, and its intention to move its primary listing to Australia’s ASX.

The Fonterra Shareholders’ Fund, which gives outside investors access to the co-operative’s dividends, slid 1.6% to $3.05. Cabinet has agreed to support changes to Fonterra’s structure that will cap the size of the fund and restrict trading between farmer-owned shares and the NZX-listed units.

Elsewhere in Asia, sharemarkets also retreated on Wednesday, echoing the broad decline on Wall Street.

Japan's benchmark Nikkei 225 dropped 1.9%, South Korea's Kospi slipped 1.1%, Australia's S&P/ASX 200 shed 0.7%, Hong Kong's Hang Seng lost 0.9% and the Shanghai Composite index fell 0.6%.

Worries over restrictions on movement and business activity in Beijing, Shanghai and other Chinese cities to combat a rise in coronavirus cases are also weighing on investor sentiment.

- With AP