ASB senior economist Mike Jones said this morning that the RBA had taken a leaf out of the Reserve Bank of NZ's book yesterday and was acquiring fresh urgency to get on top of inflation.
"The cash rate hike to 0.85 per cent was because of rising inflation pressures and the still very low level of interest rates," he said.
Fonterra buyback
Meanwhile, Fonterra Shareholders' Fund units spent most of the afternoon near the top of the index, ending the day up 1.7 per cent to $3.05.
Fonterra Co-operative Group's shares were also up 14 per cent to $2.85.
The jump followed Fonterra's announcement of its share buyback programme, which will allow Fonterra to allocate up to $50m to an on-market share buyback programme starting on June 30.
Fonterra chair Peter McBride said in an announcement: "The co-op considers the prevailing price, particularly since late April, has undervalued Fonterra shares, which is a key reason for announcing this buyback."
In December last year, Fonterra Shareholders' Fund chair John Shewan told the fund's annual meeting that the fund had "run its course" and it was time for the co-operative to buy out the unitholders.
"My question and my challenge to Fonterra is, what's its purpose?" he asked at the meeting last year.
Greg Smith, head of retail at Devon Funds, said the buyback was "sending a pretty strong signal out there".
ASB economist Nathaniel Keall said in an ASB dairy update that dairy prices have lifted at the latest global dairy trade auction overnight.
Another higher milk price – north of the $9 mark – also loomed ahead for the market, Keall said.
"While prices will move cyclically lower at some stage, we don't expect to see things fall away at any significant clip until at least the back end of the season," he said.
A2 Milk Company shares were flat at $5.14 per share in early evening trading, while Synlait Milk was up 0.88 per cent to $3.43. Honey products maker Comvita was up 5.7 per cent to $3.34.
Fisher & Paykel Healthcare helped tug the index just into positive territory as the stock jumped up 2.3 per cent to $20.57. Smith said the stock was still going through a "bit of a settling down process" as the healthcare company slowly makes its way out of a prosperous pandemic environment and into a more uncertain one.
"The company itself doesn't seem to have a great fix on what the future looks like," Smith said.
NZ Automotive Investments also rose 12.6 per cent to 89 cents per share in early afternoon trading, equalling a 10 cent jump. But the share price settled at a 6.3 per cent increase at the end of the day's trading.
Yesterday, Sky Network Television shares fell 7.2 per cent to $2.45 after a report emerged – and was then confirmed by Sky – that it had its eye on buying radio and advertising business Mediaworks, which was recently valued at roughly $150m.
Although Sky's shares got out of the right side of the bed this morning and were higher up the index in the afternoon, the share price dropped 2.9 per cent to $2.38 at the end of the day.
Smith said Sky going after the acquisition of MediaWorks instead of being acquired itself hadn't been well received by investors and described it as Sky becoming the "predator, not the prey" to investors. "There's been quite a lot of disappointment there," he said.
Chatham Rock plummeted 10.4 per cent to 37 cents in early afternoon trading, before ending the day down further at 14.5 per cent to 35 cents. Westpac Bank shares fell 6.5 per cent to $24.56, and Australia and New Zealand Banking Group also dropped 2 per cent to $26.80.
The NZ dollar was trading at 64.73 US cents at 3pm in Wellington, down from 64.69 cents. The trade-weighted index was at 71.91, from 71.96 the previous day.
