Sharemarket swings positive amid uncertain global outlook
Thursday, 3 March 2022
The sharemarket rallied, reversing yesterday’s drop, as investors try to gauge the impact of Russia’s war in Ukraine which has roiled financial markets
The benchmark S&P/NZX 50 Index jumped 1 per cent, or 122.652 points, to 12,211.40 on Thursday. That followed a 0.9 per cent drop on Wednesday.
Share prices have swung widely as investors try to figure out how the Russian attack will impact the global economy, and the future path of interest rates.
Traders were already uneasy about central banks plans to fight inflation by withdrawing ultra-low interest rates that had boosted stock markets.
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Stocks rallied on Wall Street after Federal Reserve chairman Jerome Powell said in testimony before Congress that he is inclined to support a 25 basis point rate increase at the Fed’s meeting this month, instead of the bigger rise recommended by some policymakers.
Powell said the impact on the US economy of Russia's attack is “highly uncertain.”
He added that the central bank is prepared to move more aggressively later if inflation does not come down as expected.
Powell’s comments come after European Central Bank policymakers this week argued against any drastic shift in monetary policy until it becomes clearer how the crisis in Ukraine will affect the eurozone economy.
Australia's central bank this week held interest rates at a record low, citing uncertainty around the war in Ukraine, while New Zealand’s Reserve Bank last week increased the benchmark rate and has signalled the inflationary impacts of the war could require more policy tightening.
“It’s always interest rates at the end of the day that moves the market,” said Hamilton Hindin Greene investment adviser Grant Davies. “The New Zealand market is just tracking the global markets.
“It’s quite a hard market to read at the moment,” Davies said. “Interest rates might not need to go up as much as previously expected but then obviously Powell has indicated that they still see interest rates going higher and interest rates have ticked up a little bit on the back of that in New Zealand as well.”
Davies noted that markets and individual stocks had been volatile in this environment.
He said the New Zealand market may be benefiting from a flow of funds into safer regions during such uncertain times.
“A lot of people are sitting on the sidelines at the moment just waiting to see where this all takes us and in those sorts of markets you can get a little more volatility as well,” he said.
There was little corporate news, following the end of the reporting season.
Among the larger stocks in the market, Fisher & Paykel Healthcare advanced 0.8 per cent to $28, Meridian Energy slipped 1.5 per cent to $5.22, and Ryman Healthcare rose 2.9 per cent to $9.83.
Asian stock markets rebounded with Shanghai, Tokyo, Hong Kong and Sydney advancing even as Russian forces bombarded Ukraine’s second-largest city and besieged two ports.
- With AP