INSIGHTS BLOG

WEEK IN REVIEW: 1 - 5 APRIL

Research Team, 5 April 2019

On Tuesday, the NZX 50 marked a sixth-straight gain and a sixth-consecutive record closing high after the after the Reserve Bank of New Zealand unexpectedly shifted towards an easing bias in the previous week.

However, profit-taking arrived to the local market on Wednesday, as local investors paused for a breath after the strong rally in recent sessions. At the time of writing, the index is up 12.8% this year, closing just 42 points shy of the 10,000 level on Tuesday. Within the index, Mainfreight, Port of Tauranga, Freightways, Mercury, Infratil and Skellerup all closed at records. At the other end of the spectrum, shares in Sky TV fell to fresh new lows, closing Wednesday at $1.28, down more than 30% this year.

Dairy prices continued to climb at the latest Global Dairy Trade auction with the GDT Price Index rising 0.8%.

Most products at the event saw a lift in price with rennet casein (up 7.5%) and butter (up 5.8%) leading the gains. The price of whole milk powder, however, fell 1.3%, and lactose declined 5.3%.

In corporate news, Spark announced the shock resignation of CEO Simon Moutter after seven years in the role, effective from June 30.

In a statement, Spark Chair Justine Smyth said the Board of Directors have appointed Spark Customer Director Jolie Hodson as his successor. The announcement comes as the company finds itself at the centre of international tensions regarding its attempted partnership with Chinese telecommunications company Huawei. It also comes as Spark embarks on a major push to compete with Sky TV over sporting event broadcast rights. Shares traded down 3.3% following the announcement.

Outside the benchmark index, Plexure surged 35.5% to 42 cents after it was reported McDonald’s is spending $5.4m on a 9.9% stake in the company.

McDonald's says its investment in Plexure will provide it with enhanced access to Plexure's technology in the quick-service restaurant space, including access to greater back-end and front-end features, customer functionality and customer targeting.

Across the ditch, the Reserve Bank of Australia (RBA) kept the Official Cash Rate (OCR) at a record low of 1.5% on Tuesday.

however, markets are pricing in a 90% probability of a rate cut by August. The RBA has not moved the OCR in 32 months, but a change in tone on the back of falling house prices was among a number of subtle shifts towards a dovish tone. Falling house prices, particularly in Sydney and Melbourne have seen their dwelling values fall 13% and 10%, respectively, since their peaks.

Staying in Australia, shares extended their gains for a seventh straight session on Wednesday after a positive federal budget helped the market climb to a six-month high. Treasurer Josh Frydenberg announced the first surplus in a decade. Middle-income earners were the biggest winners while the government increased its infrastructure investment to A$100bn. Upbeat retail sales and trade data also boosted sentiment in the region. Meanwhile, the materials sector jumped to its highest level in over a seven years as the price of iron ore continued to surge.

Asian markets also climbed higher this week after activity in China’s services sector picked up to a 14-month high in March. Demand improved at home and abroad, adding to signs that the government stimulus policies are gradually kicking in. Sentiment in the region also got a boost from reports that the US and China may be inching closer to a trade agreement, with the two countries set to resume negotiations next week.

Oil prices also stood near multi-month highs.

This was amid concerns over supply, with Brent crude up at US$69.68, close to its highest level so far in 2019 and near the key level of US$70 per barrel.