NZ dollar and NZX miss out on strong rally after Covid-free streak ends

Tuesday, 16 June 2020

Reporter Josh Dye flies from Sydney to Melbourne to see how air travel has changed in the wake of the coronavirus pandemic.

Financial markets appear to have weathered the bad news that two women who travelled to New Zealand from the UK were diagnosed with Covid-19 after they were let out of quarantine early.

However, the local share market did miss out on a strong rally seen in Australia.

The Covid cases broke a 24-day streak of no new reported cases of the virus.

The New Zealand dollar and the NZX50 had both been retreating from their morning highs when news of the new cases broke shortly after 1pm.

They continued to slip slightly – but not at a changed pace – in the immediate aftermath of the announcement, and then recovered.

Infometrics economist Brad Olsen said he didn't believe the market would be too concerned about the new cases.

'But I am a little bit incredulous that we didn't already require a negative Covid test before people could leave quarantine,' he said.

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Director-general of health Ashley Bloomfield revealed that after arriving in New Zealand on June 6 the two women were allowed out of quarantine on compassionate grounds to drive to Wellington by private car on June 13 to visit a dying relative, and were only tested when in Wellington.

The NZX50 had been edging lower in early afternoon trading but it doesn't appear possible to blame that conclusively on the end to NZ's Covid-free streak.

Other than fellow passengers on their flight from Brisbane, people in quarantine, hotel staff, the health professionals who tested them for Covid, and border staff, the only person the women had come into contact with was one family member in Wellington, he said.

Olsen said 'what this could filter into is a general feeling that we – New Zealand and the rest of the world – are not out of the woods yet'.

Overseas markets appeared to react strongly last week to a new coronavirus outbreak in Beijing as well as a downbeat OECD report on the economic impact of the virus, he noted.

The overall number of new Covid infections globally continues to climb and hit a daily record of 142,113 new diagnoses on June 12, up from 85,584 on May 12.

Hamilton Hindin Greene investment advisor Grant Davies said he would not expect too much of a market reaction to the new New Zealand cases.

That was on the assumption – prior to Bloomfield's revelation – that the cases had been well-contained.

The subsequent information on the women's travel movements did not change his view too much, he said.

But the share market had not enjoyed the same strong rally that the ASX and Asian markets had enjoyed on Tuesday afternoon, he noted.

The ASX200 index was trading up 4.3 per cent shortly after the NZX closed at 5pm, New Zealand time

'We missed the rally, but we usually move in smaller multiples compared to Australia,' Davies said.

Tuesday's developments were a reminder to everyone not to get too complacent, he said.

The New Zealand dollar had recovered to US64.85 cents, less than US0.2c down on its day high, shortly after 5pm.

But it fell about 0.7 Australian cents during the course of the day.

The NZX50 closed at 10953, up 0.8 per cent on the day, and down less than 50 points on its noon high.