NZ stocks: Tower one of few standouts as hawks circle

The New Zealand sharemarket shed most of Tuesday's 21 point gain yesterday in reaction to the Reserve Bank's tightening bias towards interest rates.

The NZSE-40 capital index closed down 5.81 points at 1946.46.

Turnover was 151 million shares valued at $170 million.

In a move seen as an early Christmas present for mortgage payers Reserve Bank governor Don Brash played Santa in his December monetary policy statement, leaving the Official Cash Rate unchanged at 6.5 per cent.

But behind this seemingly generous gesture was the more serious prediction of a rate increase early next year.

The bank's central forecasting scenario has 90-bank bill rates peaking at 7.5 per cent - three quarters of a per cent above their current level of 6.75 per cent, with the bank likely to move rates in its next policy statement on January 24.

Credit Suisse First Boston broker David Price said the announcement - which went against moves in the US and Australia to ease interest rates - had caused the market to slide back from Tuesday's gains.

"We are still the only country in the world that seems to be adopting a tightening bias. The US and Aussie are going to be easing in the first quarter of next year, while we are going to be tightening."

Stocks to lose ground included Lion Nathan, down 10c at $5.35 and INL down 10c at $3.20.

Telecom fell 8c to $5.56. A Financial Times report from London suggesting Japanese mobile phone giant NTT DoCoMo had cooled on plans for an investment in C&W Optus was seen as negative for Telecom which had been associated with any possible deal.

Tower climbed 20c to $5.05 after Tuesday's profit result.

Market newcomer Powerco gained 1c to $1.36. The big turnover in the power company appeared to be the completion of the earlier Alliant sale at $1.20.

Fletcher Energy gained 20c in early trade after a strong performance by its US asset Capstone overnight, but was pulled back by the weak market and stronger dollar to end the day up 7c at $8.45.

Fletcher Forests rights again topped the exchange's top 10 by turnover, with 80 million shares changing hands. Forests' rights ended the day unchanged at 0.1c; its head shares closed down 1c at 25.

Fletcher Building closed up 4c at $1.92.

Nuplex shares were unchanged at $3.20 after the announcement that it had agreed to buy private Australian waste disposal company Medihold International.

Baycorp jumped 20c to $11.30 and Fisher and Paykel rose 5c to $7.35. Rises outnumbered falls 65 to 29.

- NZPA