The NZ stock market recovered after indications central banks would take steps to respond to the impact of coronavirus. Photo / File
The NZ stock market recovered after indications central banks would take steps to respond to the impact of coronavirus. Photo / File
The S&P/NZX 50 Index jumped more than 3.5 per cent in the first hour of trading as the prospect of combined stimulus from a range of central banks cheered investors and attracted bargain hunters after a savage sell-off during the past week.
"The buyers are back in force after a pretty impressive rally on Wall Street," said Hamilton Hindin Green director Grant Williamson. "It's a rather amazing turnaround."
The three main indices on Wall Street all ended close to 5 per cent higher and the NZX50 was up 3.7 per cent, or 411.88 points, at 11,514.31 at 11:10 am in Wellington after falling for the past six days.
"What we are experiencing is extreme volatility," said Williamson. "This really just shows that yesterday we were in a very oversold position."
Markets have been roiled by concerns about the worsening covid-19 outbreak and its potential impact on global growth. Overnight, the OECD said the virus "presents the global economy with its greatest danger since the financial crisis."
According to the Johns Hopkins CSSE virus tracker, there were 90,284 confirmed cases globally and 3,085 deaths. The World Health Organisation told a March 2 press briefing that "containment of COVID-19 is feasible and must remain the top priority for all countries."
Market sentiment turned positive after recent comments from the US Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank suggesting they are all ready to act.
"We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks," the ECB said overnight, echoing similar comments from other major central banks and giving rise to speculation they may be planning coordinated action. Central bankers and finance ministers of the world's seven biggest economies are due to meet on Tuesday to discuss the outbreak.
Coronavirus has sparked widespread panic. Photo / AP
Economists widely expect the Reserve Bank of New Zealand to cut the official cash rate as early as this month, with market pricing now pointing to at least three cuts to 0.25 per cent within a year.
"Interest rates are already at historic lows and are set to go even lower, which is good for equity markets," said Williamson.
Strong gainers on the NZX today include Air New Zealand, recently up 9.1 per cent at $2.28 after falling 7.9 per cent yesterday. Williamson noted the airline was still well off the $3.05 it was trading at ahead of any covid-19 news early in January.
"That's understandable," he said, given the tourism and travel sector will be among the hardest hit by the fallout from covid-19.
Among other strong gainers, Sky Network Television was up 5.7 per cent at 56 cents while Tourism Holdings rose 7.5 per cent to $2.58. Meridian Energy lifted 6.5 per cent to $4.90 and Contact Energy was up 6.1 per cent at $7.
The kiwi dollar remained steady at 62.59 US cents versus 62.56 cents at 8am.
Investors are watching and waiting for the Reserve Bank of Australia's rate decision later this afternoon. Westpac economists expect a 25-basis point cut to 0.5 per cent but noted opinions are divided, with a Bloomberg survey finding a narrow preference for no change.
If the RBA were to cut, it would up the ante on New Zealand's central bank to follow suit given the interest rate differential would widen to 50 basis points.
The two-year and the 10-year swap rates also showed some recovery, with the two-year rate lifting around 6 basis points to 0.75 per cent. Yesterday it hit a record low of 0.61 per cent.
