Sharemarket slips as investors await key US inflation report

The sharemarket weakened as investors nervously await a key United States inflation report which will set the tone for future interest rates.

The benchmark S&P/NZX 50 Index slipped 0.4%, or 51.064 points, to 11,762.15 on Tuesday. On the broader market 71 stocks gained and 65 fell with $116 million shares traded.

Asian stocks mostly followed Wall Street higher ahead of US inflation data to be released overnight which traders hope will show surging US inflation eased in August, reducing pressure for more interest rate hikes. US inflation eased to 8.5% in July after hitting a four-decade high of 9.1% in June.

“The key data out tonight in the US is the CPI data so markets have rallied, and bounced reasonably strongly into that,” said Brad Gordon, an investment adviser at Hobson Wealth Partners. “There’s probably just a bit of nervousness and trepidation from most market segments waiting to get that lead.

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“It’s going to be very indicative for where interest rates go.”

Surveys show traders expect the Fed this month to raise rates for the fifth time this year and by 0.75 percentage points, three times its usual margin. Then, traders expect the US central bank to hold rates steady through the first half of 2023.

Gordon said wholesale interest rates in New Zealand suggested inflation may have peaked, with the five-year swap rate pulling back to 4% from 4.2% last week.

He said there was little company news at the moment, and the market was being driven by macroeconomic events.

Retailer Briscoe Group will report its first-half result tomorrow. The stock slipped 0.2% to $5.35.

Last month, the company said first-half sales rose 2.7% to $367.9m, but it expected first-half profit to be down about 4% on last year’s $47.5m as the Omicron outbreak hurt first-quarter trading.

The Fonterra Shareholders’ Fund jumped for a third day, adding 4.2% to $3.45, taking its gain so far this month to 17%.

On Friday, the co-operative increased its forecast for next year’s earnings to 45c to 60c per share, from 30c to 45c per share.

The revision was an upgrade of more than 40% from Fonterra’s original guidance provided in June, Forsyth Barr said in a research note.

While it was a strong result, Forsyth Barr analysts said dairy market prices could be volatile and they were more conservative in their forecast for earnings of 45c to 50c per share.

Fonterra is scheduled to report its results for this year next Thursday.

My Food Bag jumped 5% to 63c, having lost 43% so far this year.

Gordon said the meal kit company had been “severely oversold”, which had attracted buyers.

Larger stocks on the bourse were mixed. Meridian Energy gained 0.2% to $5, Fisher & Paykel Healthcare advanced 0.2% to $20.52, Auckland International Airport slid 0.3% to $7.70 and Spark fell 0.4% to $5.43.

Mercury closed flat at $6.16 after the company announced it had committed to a new $115m wind farm near Gore. The Kaiwera Downs wind farm will initially have 10 turbines built, enough to power an estimated 20,000 homes or 66,000 electric vehicles.

The company said construction crews were expected to start in October, and the project was likely to take a year.

Elsewhere in Asia, Shanghai, Tokyo, Hong Kong and Sydney advanced. Oil prices edged lower.

Wall Street’s benchmark S&P 500 index gained 1.1% on Monday for its fourth daily rise.

– With AP