Sharemarket falls as nervous investors shift money into bonds

Wednesday, 2 March 2022

The sharemarket fell as nervous investors, concerned about Russia's escalating war on Ukraine, shifted their money into bonds.

The benchmark S&P/NZX 50 Index dropped 0.9 per cent, or 109.175 points, to 12,088.75 on Wednesday.

The local market followed overseas markets lower as investors around the world sought the relative safety of bonds. In the US, the S&P 500 index fell 1.5 per cent, the Dow Jones Industrial Average fell 1.8 per cent, and the Nasdaq composite slid 1.6 per cent. The main stock indices in Germany, France, Italy and Spain closed down more than 3 per cent and the pan-European STOXX 50 index fell 4 per cent.

While the New Zealand market had held up better than the rest of the world, uncertainty around the war in Ukraine and concerns that it may become protracted was worrying investors, said Harbour Asset Management portfolio manager Shane Solly.

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In this photo provided by the New York Stock Exchange, specialist Stephen Naughton works at his post on the trading floor on a volatile day as investors weigh the impact of the war in Ukraine.

Bonds rallied after comments from European Central Bank policymakers arguing against any drastic shift in monetary policy until it becomes clearer how the crisis in Ukraine will affect the eurozone economy.

“Central banks around the world are recognising Ukraine as being a new risk that they need to think about,” Solly said. “It is reason to pause perhaps in this rate hike cycle.”

The comments came after Australia's central bank on Tuesday held interest rates at a record low, citing uncertainty around the war in Ukraine.

Financial stocks were weaker as previous expectations for interest rate hikes became less certain.

Australian banks which were dual listed in New Zealand declined. Westpac fell 2.6 per cent to $24.08, while ANZ fell 3.1 per cent to $27.51.

Auckland International Airport slid 3.4 per cent to $7.10 on concern about whether travel demand would pick up given uncertainty around Covid-19 and the war in Ukraine.

Fletcher Building dropped 2.7 per cent to $6.61. Stats NZ data released on Wednesday showed t he number of consents issued for houses dropped in January, suggesting strong building activity may have peaked.

Retirement village operator Ryman Healthcare fell 4.8 per cent to $9.55.

Fonterra Shareholders’ Fund, which gives investors access to the dairy co-operative’s dividends, fell 1.3 per cent to $3. The country’s largest dairy processor has suspended shipments of dairy products to Russia, and its margins may be squeezed as it faces higher milk payments to farmers.

Prices on the Global Dairy Trade platform jumped 5.1 per cent overnight to hit a new record high, prompting speculation milk payments to farmers could move higher this season and continue their strength next season

“Its input costs are going up,” Solly said. “A higher GDT is great for the dairy farmers but not so good for the processing manufacturing Fonterra and combine that with stiff headwinds from what might be occurring in Russia for their trade there.”

Bucking the downward trend, defensive stocks gained, as investors bet interest rates may not rise as fast as they previously anticipated.

Meridian Energy increased 1 per cent to $5.30, while Genesis Energy lifted 0.7 per cent to $2.80.

- With AP