Stock rally stalls as US virus response disappoints

A lack of follow-through from the US on how it would respond to the covid-19 outbreak disappointed investors. Photo / Getty Images

New Zealand shares turned around an early rally as a lack of follow-through from the US on how it would respond to the covid-19 outbreak disappointed investors.

The S&P/NZX 50 Index rose as much as 2.7 per cent in early trading as investors recovered some lost confidence after a savage start to the week. The stand-off between Russia and Saudi Arabia over oil production added more uncertainty to an environment where a global recession remains a live threat in the face of the virus outbreak.

But the local benchmark index ended the day down 23.87 points, or 0.2 per cent, at 10,873.60. Within the index, 22 stocks fell, 26 rose, and two were unchanged. Turnover was heavier than usual at $247.9 million.

Shane Solly, a portfolio manager at Harbour Asset Management, said the initial rally was on the expectation that US President Donald Trump would announce a more detailed response to the virus outbreak. When that didn't happen, financial markets soured.

"One of the things, globally, that people are looking for is monetary and fiscal stimulus, so that's going to be quite important," he said.

"The market tried to have a rally, but it didn't last very long."

New Zealand's NZX outperformed Australia, where the S&P/ASX 200 Index was down 2.9 per cent in afternoon trading.

Solly said Australia's financial sector was among the hardest hit as investors weigh up what further interest rate cuts by the Reserve Bank of Australia would do to banks' margins.

Of the dual-listed lenders, Australia & New Zealand Banking Group fell 4.1 per cent to $20.90 on the NZX and Westpac Banking Corp was down 3.3 per cent at $20.40. Heartland Group Holdings, which operates Heartland Bank and a reverse mortgage business in Australia, rose 3.4 per cent to $1.50.

Sky Network Television led the market lower, falling to 9.8 per cent to 46 cents, a new low.

Summerset Group fell 5.2 per cent to $6.58 and Ryman Healthcare declined 1.7 per cent to $14.20. Metlifecare increased 0.3 per cent to $6.79, Arvida Group rose 1.9 per cent to $1.60 and Oceania Healthcare advanced 3.1 per cent to $1.01.

Solly said some investors were wary of the retirement and aged-care stocks because their residents were vulnerable to the virus, despite "the amazing record" of the operators who are well-versed to deal with those types of issues.

"They do a great job, so it is interesting that the market has decided it's an issue when in fact these are the best-placed operators to deal with it," he said.

Utilities were stronger as investors reassessed the value of dividend yields from the likes of the electricity generator-retailers.

Meridian Energy rose 2.8 per cent to $4.43, Mercury NZ advanced 2 per cent to $4.71, and Trustpower increased 1.9 per cent to $6.30.

Synlait Milk declined 3.2 per cent to $5.10. The milk processor today bought land adjacent to its Dunsandel plant for $25.7m, which it said would give it greater control over water rights, help reduce its truck movements, and let it carry out on-farm research.

A2 Milk, which is Synlait's second-biggest shareholder and counts it as a supplier, was unchanged at $16.10.

Stride Property posted the day's biggest gain, up 3.9 per cent at $2.13.

Air New Zealand increased 0.8 per cent to $1.92. The carrier had climbed as much as 10 per cent in early trading.

Auckland International Airport was the most traded stock on a volume of 6.4 million shares, four times its three-month average. It decreased 0.3 per cent to $7.73.

Outside the benchmark index, AFT Pharmaceuticals rose 5.1 per cent to $3.89, extending its gain yesterday when it said the virus outbreak had boosted demand, and that its annual sales would be at the top end of guidance.

Green Cross Health, which runs the Unichem and Life Pharmacies chains, rose 6.2 per cent to $1.20.

Comvita increased 2.1 per cent to $1.93. The honey products maker said its February performance was in line with forecast, with strong online sales offsetting declines in traditional retail stores and duty free sales.