Economists are now expecting the Reserve Bank to increase the official cash rate (OCR) by 75 basis points to 4.25 per cent because of the strong growth in employment, hours worked and wages. The OCR could reach a peak of 5 per cent by April next year.
Matt Goodson, managing director of Salt Funds Management, said wage inflation is very much alive and well and the Reserve Bank has one last chance this month to hike interest rates.
"At this point 75 basis points looks likely as the bank has a large break before it meets again (in February). Long-term bond yields increased following the strong employment data and this probably weighed on the sharemarket a little bit."
In its Financial Stability Report, the Reserve Bank warned of increasing economic risks from falling house prices. Higher mortgage rates combined with falling house prices could lead to more people being unable to meet their payments, leading to an increase in distressed home sales. This risk could intensify if unemployment starts to rise significantly.
The New Zealand 10 Year Government Bond yield was up 14.76 basis points to 4.425 per cent and the 2 Year increased 11.7 points to 4.566 per cent.
The NZ dollar strengthened to US58.69c, from an intraday low of 58.33c, against the American greenback.
There were few major moves amongst the leading stocks on the local market.
Fisher and Paykel Healthcare was down 11c to $20.05; Spark shed 8c to $5.07; Freightways declined 25c or 1.86 per cent to $10.02; Mercury Energy decreased 6c to $5.71; Briscoe Group fell 12c or 2.38 per cent to $4.92; and Tourism Holdings was down 8c or 2.19 per cent to $3.57.
Chorus came back to earth after its 6 per cent rise on Monday, falling 25c or 3.07 per cent to $7.90.
Port of Tauranga increased 13c or 2.07 per cent to $6.40; Manawa Energy added 15c or 2.73 per cent to $5.65; Vector gained 8c or 1.94 per cent to $4.20; Skellerup Holdings collected 11c or 2.04 per cent to $5.51; Vulcan Steel rose 47c or 5.58 per cent to $8.89; and Comvita was up 7c or 2.21 per cent to $3.24.
In the property sector, Vital Healthcare Trust was up 5c or 2.08 per cent to $2.45; Property for Industry gained 7c or 2.82 per cent; and Goodman Trust was down 7c or 3.4 per cent to $1.99.
Air New Zealand continued its strong move, rising 3c or 3.82 per cent to 81.5c; Move Logistics rebounded 6c or 5.45 per cent to $1.16; Third Age Heath was up 7c or 3.5 per cent to $2.07; Trade Window gained 8c or 13.79 per cent to 66c; and NZ King Salmon Investments picked up 1.5c or 7.14 per cent to 22.5c.
Sky Network Television increased 6c or 2.7 per cent to $2.28 after telling shareholders at the annual meeting that it was lifting its dividend pay-out to 60-90 per cent of free cash flow following the capital expenditure spend. As a result, the 2023 dividend guidance has been increased to $18m-$24m.
Sky TV is seeking a court-approved scheme of arrangement to return $70m of capital and shareholders should receive cash of 40c a share by late November. Sky TV had a $139m cash balance at the end of the last financial year.
Among the decliners, Oceania Healthcare was down 2c or 2.41 per cent to 81c; Winton Land decreased 4c to $2.21; Vital shed 3c or 7.89 per cent to 35c; and Cooks Coffee declined 1.5c or 3.61 per cent to 40c.
TruScreen Group, down 0.002c or 4.35 per cent to 4.4c, has completed its first global virtual medical symposium on cervical cancer screening, and its system will be used in two additional Vietnamese hospitals following Ministry of Health approval.
United States-based ArborGen Holdings, unchanged at 23c, told the market it should be entitled to receive US$2m ($3.41) of employee retention credits under the Coronavirus Aid Relief and Economic Security Act.
