Sharemarket ends week at lowest level in more than 7 months

Friday, 21 January 2022

The sharemarket fell to its lowest level in more than seven months as investors remained concerned about higher interest rates and the likelihood of an Omicron outbreak ahead.

The benchmark S&P/NZX50 Index dropped 1.2 per cent, or 149.098 points, to 12,348.00 on Friday, its lowest close since May 31 last year.

“It’s continuing a fairly weak start to the year,” said Devon Funds Management’s head of retail Greg Smith.

Investors are bracing themselves ahead of a Federal Reserve meeting next week, as expectations for interest rate hikes grow in an environment of rising inflation. The Reserve Bank of New Zealand is due to review its rate next month.

The sharemarket is continuing a weak start to the year, closing at its lowest level in more than seven months.

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“There’s concern over a rising interest rate environment and what that does to the appetite for stocks,” Smith said.

There was also some nervousness about an outbreak of Omicron amid fears the Covid-19 variant may already have spread in the community.

On Thursday, Prime Minister Jacinda Ardern said if Omicron – which is much more contagious than other variants of Covid-19 - was in the community then the country would need to go into the red traffic light system.

“There’s a bit of concern about how the New Zealand economy travels over the next few months given we are not really in a position to follow a ‘let-it-rip’ strategy,” Smith said.

“People are a bit wary. There may be a fear there that we revert back to the old system of lockdowns because our health infrastructure cannot really handle the path that Australia has followed.”

Investors were waiting to see the impact of Omicron, as well as how companies were tracking when they report their earnings next month, he said.

Meal delivery service My Food Bag slipped 0.9 per cent to $1.13 after it reaffirmed its full-year earnings guidance but noted that inflationary pressures in labour and produce costs were starting to bite.

The biggest stocks traded by value included Meridian Energy, down 0.2 per cent to $4.64, Fisher & Paykel Healthcare down 3.5 per cent to $29.35, Contact Energy down 0.9 per cent to $7.75, and Fletcher Building down 0.7 per cent to $7.07.

On Wall Street, the benchmark S&P 500 index fell 50.03 points, or 1.1 per cent, to a three-month low of 4,482.73. A late-afternoon sell-off wiped out earlier gains with higher growth stocks hardest hit by expectations for higher interest rates.

Shares were also lower in Asia on Friday following the sell-off on Wall Street. In Australia, the S&P/ASX 200 in Sydney dropped 2.2 per cent to 7182.30.

- With AP