NZ stocks drop after inflation data drives Wall St rout

NZ share prices opened weaker after a sharp fall on Wall Street. Photo / NZME

The New Zealand sharemarket dropped by 1.2 per cent in the opening minutes of trade after a worse-than-expected US inflation number prompted a sell-off on Wall Street.

Hopes that the Federal Reserve can engineer a soft landing for the US economy took a hit when the US consumer price index increased 0.1 per cent for August, above economists' expectations for a 0.1 per cent drop.

The year-on-year rate came to 8.3 per cent.

Core inflation — which strips out volatile items like energy and food — rose by 0.6 per cent for an annual increase of 6.3 per cent, compared with 5.9 per cent recorded for July.

Wall Street's S&P 500 index closed down 4.3 per cent, the worst performance since June 2020.

The Nasdaq Composite ended more than 5 per cent lower.

After 20 minutes, the New Zealand S&P/NZX50 index was down by 145 points or 1.2 per cent at 11,624.

Salt Funds managing director Matt Goodson expected the market to weaken further throughout the day.

Across the Tasman, the benchmark ASX 200 fell by 1.07 per cent within the first few minutes of trade. It was down by 2.83 per cent, or 198.3 points, to 6811.4 points after the first 45 minutes of the session.

The tumble resulted in A$66 billion ($74.1b) in market capitalisation being wiped out within the first 45 minutes of trading, according to news.com.au.

"Obviously inflation is the issue," Goodson said. "It is the issue in America, it's the issue in New Zealand and in Australia.

"With labour being 70 per cent of the cost of everything, and with wage inflation being quite strong, it's going to take time to get on top of it."

After 30 minutes, F&P Healthcare - the market's biggest stock - was down 45 cents or 2.1 per cent at $20.07.

In a market commentary, Kiwibank said the higher US inflation number added impetus for the Fed to hike rates by 75 basis points at its next meeting.

Some are calling for a 100 basis point hike.

The US dollar rose against most currencies, most notably the euro and yen.

The New Zealand dollar had a rapid fall, getting to a low of US$0.5987 early in the morning.