Investors likely cheered by move to alert level 1

Full commercial activity is set to return to NZ sooner than expected. Photo / File

The domestic market may gain on news that New Zealand could normalise nearly all activity sooner than expected and after Wall Street ticked up with US investors shrugging off domestic unrest and focusing instead on the economic recovery.

Prime Minister Jacinda Ardern signalled New Zealand could shift to alert level 1 as early as June 10. Alert level 1 is effectively life as usual with the borders still closed. Ardern had previously said the country would move no later than June 22.

The comments came as New Zealand has registered no new cases of covid-19 for 10 days.

In the US, meanwhile, sentiment got a boost when the Institute for Supply Management's purchasing managers' index lifted to 43.1 in May versus 41.5 in April.

The faint signs of improvement suggest the worst may be over as many states loosen restrictions and people begin to return to work.

The Dow Jones Industrial Average was up 0.4 per cent at 8am in Wellington, while the S&P500 was up 0.4 per cent and the Nasdaq had added 0.7 per cent.

Markets largely overlooked ongoing protests in a raft of US cities over racial inequality and excessive police force. According to Reuters, the National Guard has been deployed in 23 states and Washington, D.C.

The initially peaceful protests were sparked by the death of George Floyd in police custody in Minneapolis last Monday but have become increasingly violent. People in different cities around the world - including Wellington, Auckland and Christchurch - have also held protests in support of the US Black Lives Matter movement.

"Markets are dispassionate and respond to technical support and resistance levels. Right now the market is in an uptrend as investors are focusing on the reopening of the global economy and are looking to 2021 EPS growth, knowing full well that 2020 EPS will be abysmal," Sam Stovall, chief investment strategist at CFRA Research in New York, said in an emailed comment to BusinessDesk.

Also, "investors are not being lured away by alternative investments, such as bonds," he said.

The New Zealand dollar also fared well with the kiwi "reaching for the stars again amid a strong risk-on mood," said ANZ Bank senior economist Miles Workman.

The kiwi was helped by news that the Chinese economy is continuing to show signs of recovery. The Caixin China manufacturing purchasing managers index climbed to 50.7 in May from 49.4 in April, according to Dow Jones Newswires.

The kiwi was trading at 62.94 US cents at 8am in Wellington versus 62.06 cents at 5pm Friday, ahead of the long weekend and Workman said a break of 63 US cents "now looks imminent."

- BusinessDesk