Jarden Brief: Why the NZ dollar hit 34-month highs

NZ's virus response has pushed the NZ dollar higher. Photo / Getty Images

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand:

The NZX 50 was down just shy of 1 per cent yesterday, despite a strong open.

The Consumer Staples sector performed well, with NZ's largest company Fonterra up 4.4 per cent and Comvita up 2.5 per cent. Meanwhile, Ebos saw some selling off - falling 3.8 per cent, although only 167 thousand shares were traded.

Agri products manufacturer Skellerup surged 8.3 per cent after its record result last week, in which the company lifted its profit by 61 per cent on the prior half. Air New Zealand and Auckland International Airport were also up by 2.3 per cent and 1.8 per cent respectively.

Heartland Bank was flat after reporting a net profit of $44.1 million for the half, an increase of $4.2 million or 10.6 per cent compared to the year before. A $5.2 million fair value gain was recognised in Heartland's stake in Harmoney, which recently listed on both the NZX and the ASX.

Freightways' (down 2.1 per cent) released its first-half result. They featured ebitda of $99.8 million (up 40 per cent,) underlying profits of $41.2 million (up 41 per cent) and headline sales of $410.3 million (up 28.7 per cent). The company gave no earnings guidance.

The New Zealand dollar has rallied to 34-month highs (US$0.7338) on the back of news that S&P has raised the nation's sovereign currency ratings. Foreign ratings were up to AA+/A-1+ (from AA/A-1+) and domestic ratings were up to AAA/A-1+ (from AA+/A-1+). The move comes on the back of New Zealand's relatively successful containment of Covid-19 and the relatively quicker economic recovery this has underpinned. While this may have been good for New Zealand tourists, were they permitted to go overseas, a strong kiwi dollar means exporters will be paid fewer NZD for their product.

INTERNATIONAL MARKETS:
US:

At the time of writing the S&P 500 was down 0.5 per cent. The Dow Jones was up 0.2 per cent and the Nasdaq was down 1.6 per cent as the technology sector underperformed the market.

Energy was the best performing sector on the day, up 4.0 per cent as commodities rose across the board. Oil and gas explorer and producer Marathon Oil was one of the top performers on the day, up 10.6 per cent. Schlumberger, a company with similar exposure to Marathon, was another beneficiary and was up 7.0 per cent.

The top spot was reserved for bank holding company Peoples United Financial, up 14.9 per cent. The jump came after it was announced that M&T Bank had agreed to acquire Peoples united for US$7.6 billion – around a 13 per cent premium to last Friday's closing price.

The worst performer on the day was multinational medicine distributor Veritas, down 13.5 per cent. The slump was driven by company forecasts putting 2021 revenue between US$17.2 billion and $17.8 billion. This was disappointing compared to consensus forecasts for $18.5 billion.

Asia:

At time of writing the Shenzhen index was down 2.1 per cent and the Shanghai index was down 1.5 per cent.

Commodities:

At time of writing, gold was up 1.6 per cent to US$1776.0 per ounce, gaining ground as other perceived stores of value lost out. Bitcoin was down 3.8 per cent to US$53,370 while Ethereum was up 10.9 per cent to US$1740. WTI Crude oil was down 2.1 per cent to US$60.5 per barrel. US 10-year treasury yields were up fractionally to 1.342 per cent.

Australian Markets:

Australian markets were down 0.2 per cent to kick off the week, with large cap stocks creating a drag on index performance.

Healthcare giant CSL fell 2.4 per cent, National Australia Bank dropped 2.2 per cent and Westpac fell 1.5 per cent. Bunnings and Kmart owner Wesfarmers was down another 1.5 per cent following digestion of a disappointing result last week. On the other hand, Costa surged 13 per cent to A$4.53 after reporting a A$60.8 profit for the year, a big reversal of its A$36.1 million loss last year.

Most sectors were in the red yesterday, with the Healthcare sector (-2.2 per cent) largely down due to CSL's performance. Meanwhile, Information Technonogy (-1.7 per cent), Communications (-1.3 per cent) and Consumer Cyclical (-1.2 per cent) stocks were also down. Materials (+2.6 per cent) was the only sector in the black, led up by Sandfire Resources (+8.5 per cent) and buoyant copper prices.

Vaccine optimism was also key in the rallies of 'reopen' stocks. Positive data out of Dubai showing higher efficacy for the Pfizer vaccine caused travel-exposed stocks such as Sydney Airport (+1.3 per cent), Webjet (+8.9 per cent), Flight Centre (+7.2 per cent) and Qantas (+4.3 per cent) to outperform the index.

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Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimer