NZ stocks shrug off recession news - Market close

The S&P/NZX 50 Index closed at 11,915.71, up 83 points or 0.57 per cent.

New Zealand joined rising offshore markets with a gain of more than half a per cent as the United States looked forward to three interest rate cuts this year.

The S&P/NZX 50 Index began climbing at lunchtime and closed at 11,915.71, up 83 points or 0.57 per cent after falling to a morning low of 11,781.51.

There were 84 gainers and 48 decliners over the whole market with 40.38 million shares worth $123.3 million changing hands.

The US Federal Reserve held its 23-year high cash rate at 5.25-5.5 per cent, and said it planned to cut the rate three times before the end of the year.

The major indices reacted with sharp rises and all reached closing highs. The Dow Jones Industrial Average increased 1.03 per cent to 39,512.13 points; the S&P 500 gained 0.89 per cent to 5224.62; and the Nasdaq Composite gained 1.25 per cent to 16,369.41.

Across the Tasman, the S&P/ASX 200 Index has risen 1.16 per cent to 7785.1 points at 6pm NZ time.

The Federal Reserve revised US economic growth to 2.1 per cent this year, up from 1.4 per cent, and unemployment at 4 per cent, down from the 4.1 per cent forecast in December. Inflation is expected to run at 2.4 per cent despite a lift in oil prices.

Greg Smith, head of retail with Devon Funds Management, said the Federal Reserve has rung the bell on rate cuts. “While the war on inflation is not over, progress has been made on the battlefront.

“The Fed is now in a position of accepting that inflation is getting back to the target range over a slightly longer framework and the central bank is taking a balanced view to engineer a soft economic landing.”

Smith said central banks work in unison and perhaps the New Zealand Reserve Bank, which has been more hawkish than others, will become patient with inflation hitting the target.

“Our economy is slowing down, with weakness in manufacturing and retail, and the Reserve Bank may look at one or two interest rate cuts by the end of the year. That’s what the market was reacting to.”

The local market shrugged off the news that the economy is in a technical recession after gross domestic product (GDP) contracted 0.1 per cent in the December quarter. ANZ Research said the GDP data continued to show that monetary tightening is working to cool the economy.

“GDP growth on a per capita basis is almost as soft as it was following the Global Financial Crisis. It’s tough going out there,” said ANZ.

The bank said it wasn’t “a run-for-the-hills recession that we’ve seen through times of financial market and economic crisis.”

“We expect this slowdown to find a floor around mid-2024, at which point the million-dollar question will be whether the slowdown has been enough to return CPI inflation sustainably to target.”

Fisher and Paykel Healthcare was up 69c or 2.88 per cent to $24.64; Meridian Energy rose 16.5c or 2.87 per cent to $5.92; Ebos Group gained 23c to $36; a2 Milk added 8c to $6.64; and Skellerup added 9c or 2.14 per cent to $4.29.

Sky TV collected 6c or 2.21 per cent to $2.78; Vulcan Steel increased 17c or 1.95 per cent to $8.87; Restaurant Brands was up 12c or 3.58 per cent to $3.47; and The Warehouse gained 4c or 2.74 per cent to $1.50.

Gentrack was up 19c or 2.34 per cent to $8.30; Vista Group gained 4c or 2.05 per cent to $1.99; Livestock Improvement Corp rose 8c or 7.48 per cent to $1.15; and Blackpearl Group increased 5c or 9.8 per cent to 56c.

Leading banks ANZ increased 60c or 1.95 per cent to $31.35, and Westpac rose 88c or 3.15 per cent to $28.78.

Fonterra Shareholders’ Fund gained 7c or 1.94 per cent to $3.67 after the dairy cooperative reported a 23 per cent increase in half-year net profit to $674m. Fonterra’s earnings per share was 40c and it is paying an interim dividend of 15c a share, up from 10c. The dairy giant maintained its forecast mid-point payout of $7.80 per kg milk solids.

Comvita fell a further 10c or 4.55 per cent to $2.10; AFT Pharmaceuticals declined 13c or 4.38 per cent to $2.84; Winton Land shed 9c or 4.11 per cent to $2.10; Green Cross Health was down 4c or 3.7 per cent to $1.04; and NZME decreased 3c or 3.41 per cent to 85c.

Geneva Finance, unchanged at 29c, has been fined $80,000 for breaching the NZX corporate governance code on the size and make-up of the board. Geneva didn’t have enough independent directors between July 31 and September 7 last year.