NZ stocks: Rates cut sends jolt through otherwise flat market

12.27 pm

A half a percentage point interest rate cut by the Reserve Bank this morning saw an immediate reaction on an otherwise cautious sharemarket this morning.

Turnover at 11am was a light $24.2 million as fears of a world recession grew. But the NZSE-40 capital index rose 11.18 points to 1841.41 as the market slowly regains its balance after Monday's Wall Street-driven 4.6 per cent slide.

Despite this, brokers were taking a cautious view.

"Investors are taking the view that it's a good time to be very, very cautious and that environment isn't going to change for some time," Alan Wills of Forsyth Barr Frater Williams, said.

Stocks which would benefit directly from a more stimulated economy reacted immediately. They included Fletcher Building up 3c to 241 and defensive stock Contact Energy, up 3c to 330. Independent News rose 9c to 310 as investors anticipated a possible rise in advertising.

Telecom, the benchmark stock, led the turnover, rising 4c to 454 on shares worth $7.5 million.

The turbulent Air NZ shares also continue to consolidate, with A shares rising 5c to 40 and B shares up 5c to 39. Auckland Airport, which is heavily dependent on Air NZ for revenue, gained 6c to 304.

Star performers Fisher & Paykel and Skycity both gathered steam again: F&P rose 20c to 1240 and Skycity rose 13c to 1100.

Other stocks to rise included the Warehouse up 4c to 589; DB Group up 10c to 510; Sanford up 25c to 625; and Wrightson up 3c to 103 ahead of its annual general meeting today.

"We're expecting the company to give us some guidance as to how trading is, and they're obviously very important in the rural sector and should be doing real well," Mr Wills said.

Among the falls were Baycorp down 5c to 1075, and Lion Nathan down 13c to 556.

Mr Wills said a Reserve Bank move was usually well considered and must reflect a deteriorating environment , but the interest rate cut would help offset that by making equities more attractive.

"There are a number of stocks that trade on good yields...against that we have a deteriorating outlook for the international economies."

Rises outnumbered falls by 55 to 24 on 118 stocks traded.

- NZPA