Sharemarket responds to move to lower fuel costs

Monday, 14 March 2022

The sharemarket pared its losses after the Government announced it would cut fuel taxes to counter a spike in prices caused by the Russian invasion of Ukraine.

The benchmark S&P/NZX 50 Index slid 0.1 per cent, or 16.274 points, to 11,805.11 on Monday, having earlier dropped as much as 0.7 per cent prior to the Government’s announcement.

Prime Minister Jacinda Ardern said the Government would cut fuel taxes by 25c a litre for the next three months – and halve public transport fares. Road user charges for diesel vehicles will be cut by a similar amount, but this may not happen as rapidly. This will also apply for three months.

“When the Prime Minister made her announcement, we actually strengthened quite a bit and Mainfreight, which was trading negative, turned positive,” said Craigs Investment Partners investment adviser Peter McIntyre.

* Sharemarket lacklustre as investors wary of Omicron, higher interest rates

Reducing the cost of fuel boosted the sharemarket.

* Sharemarket slips in line with global markets as Fed decision looms

Shares in the transport and logistics firm were trading as low as $75.11, but bounced up to around $77 following the Government announcement, and closed unchanged at $76.

Tourism Holdings, which rents and sells campervans, rose 5.3 per cent to $2.59, having jumped 9 cents, or 3.6 per cent after the announcement.

McIntyre noted that many stocks were now trading without the right to their dividends, following the earnings season, which dented investor appetite for stocks, particularly in the uncertain environment.

“We have just gone through a reporting season where a number of companies have announced dividends, and a number of companies are trading ex-dividend,” he said.

Stocks in this group included Contact Energy, down 0.6 per cent at $7.88, Port of Tauranga, down 1 per cent at $6.14, Freightways, down 1.5 per cent at $11.43, Skellerup, down 2.8 per cent at $5.24, Summerset, down 1.2 per cent at $11.16, and Vital Healthcare, down 1.4 per cent to $3.115.

“Once their dividends are released, their share price tends to pull back and that’s having an impact on where our overall market is sitting,” McIntyre said.

“In this market, it’s another reason to exit with the volatility that we have seen of late and obviously news with Ukraine, Russia, inflation, and interest rates.”

McIntyre said the 5-year swap rate, used by banks to switch between the variable rate of a loan to a fixed rate, rose to 3.2 per cent from below 3 per cent last week, signalling interest rates are expected to go higher to curtail inflation.

That meant the real estate sector was the worst performer on Monday, he said.

Property for Industry fell 1.1 per cent to $2.665, Stride Property fell 1 per cent to $1.97, Investore Property fell 0.6 per cent to $1.70, and Kiwi Property fell 1.9 per cent to $1.05.

“Generally it’s quite a defensive asset sector to own, but with interest rates increasing and our market being quite interest rate sensitive, it has just been feeling that pressure a little bit.”

Z Energy rose 1.1 per cent to $3.67 after news that Ampol had reached a deal to sell Gull New Zealand, to ease competition concerns surrounding its $1.97 billion takeover bid for Z Energy.