Market Open: Investor unease may weigh on local market

The global market remains unsteady as Covid-19 continues to cause concern. Photo / File

New Zealand's stock market may be in for a soft end to the week as investor unease weighed on US and European equities, and local data showed the economy to be in a worse state than most analysts had predicted.

Wall Street was generally weaker as new US jobless claims overshadowed stronger manufacturing data, with investors sensitive to the ongoing spread of covid-19 in China and some large American states.

That negative sentiment was also felt in foreign exchange markets as traders exited currencies linked to commodities and emerging markets in favour of safe havens such as the greenback. The kiwi fell to 64.22 US cents at 8am in Wellington from 64.47 US cents at 5pm yesterday.

"In the short term, market attention is focusing more on the rise in covid-19 cases in some US states and the potential for a second wave of infections, although there is still plenty of support for rebound and recovery themes, drawing markets into a bit of a narrative power struggle," ANZ Bank New Zealand strategist David Croy said in a note.

Data yesterday showed NZ's economy shrank 1.6 per cent in the March quarter, more than most economists had forecast and raising fears the recovery won't be as strong as some indicators were predicting.

"Many expected it, but the worse result will dampen rebound enthusiasm, with global virus re-emergence themes," Croy said.

The emergence of holes in NZ's quarantine processes have also highlighted that eradication of the virus will be harder and take longer than some had hoped. And it has made the prospect of an early trans-Tasman bubble with Australia less likely.

The S&P/NZX 50 Index dropped 1 per cent yesterday to 11,225.28, and may extend that decline today after the soft lead from Wall Street.

The Dow Jones Industrial Average was up 0.4 per cent at 8am in Wellington, the S&P500 was down 0.1 per cent and the Nasdaq was up 0.1 per cent.

Air New Zealand was among the hardest hit local stocks yesterday, warning that it faced an underlying annual loss of up to $120 million, before more than half a billion dollars of one-off costs and impairment charges. Its shares closed at $1.56 yesterday.

Transport logistics software developer Eroad and glass products manufacturer Metro Performance Glass are due to report earnings today.

No local data is due today, although the Treasury's weekly update on the economic outlook and the Ministry of Social Development's weekly jobseeker benefit claims are due for release.

- BusinessDesk