The New Zealand dollar slipped as stocks on Wall Street rallied ahead of economic data that’s expected to show a faster pace of growth in the world’s biggest economy.
The kiwi declined to 77.24 US cents at 8am in Wellington from 77.49 cents yesterday. The trade-weighted index decreased to 78.41 from 78.53 yesterday.
Stocks on Wall Street rose, with the Dow Jones Industrial Average up 0.6 percent, ahead of the third reading of US gross domestic product, which is expected to show a faster pace of growth in the US economy. The greenback has been rallying in recent months as strong US data stokes expectations the Federal Reserve will start raising interest rates next year after running a zero rate policy since the global financial crisis.
“The story remains one of US strength and the market will be watching the data tonight,” said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. “There’s a sell on kiwi/US rallies theme for the quiet Christmas period – the kiwi’s is generally stronger over this period, but there’s a reasonable risk this year will be different given what’s going on with the US dollar.”
Traders will be watching New Zealand’s November trade balance data today at 10.45am, which expected to show a wider annual trade deficit of $750 million.
ANZ’s Tuck said falling commodity prices pose a risk to the export side, while and traders will be watching that component of the data.
The kiwi dollar was little changed at 94.87 Australian cents at 8am in Wellington from 94.94 cents yesterday after oil prices continued to decline, weighing on hard commodities such as those produced in Australia. The divergence between hard commodities, including oil and minerals, and soft commodities, such as food, may prompt the kiwi to test its post-float high against the Australian dollar over the Christmas and New Year period due to illiquid markets, Tuck said.
The local currency fell to 4.8078 Chinese yuan from 4.8209 yuan yesterday, and gained to 92.64 yen from 92.51 yen. It was little changed at 63.12 euro cents from 63.25 cents, and almost unchanged at 49.51 British pence from 49.52 pence.
Wall Street rose as gains in shares of Intel and IBM outweighed declines in shares of Chevron and Exxon Mobil, as investors positioned themselves for the end of the year.
“It’s going to be pretty tough to divine anything meaningful from the market this week with Christmas coming up on Thursday and with trading desks half-staffed,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities, told Bloomberg News.
“If anything, you’re likely to see more impetus to show more equity positions and less cash going into year end, and you’re likely to see short positions drawn down.”
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.57 percent, the Standard & Poor’s 500 Index inched 0.03 percent higher, while the Nasdaq Composite Index rose 0.13 percent.
Gains in shares of Intel and those IBM, up 2.1 percent each, propelled the Dow higher.
Shares of Chevron and Exxon Mobil were among the Dow’s top three declining stocks, down 1.4 percent and 0.9 percent respectively, as oil prices dropped further on Saudi Arabia’s latest comments it will not cut production.
“A decline like this means oil hasn’t stabilised or found a bottom,” Rex Macey, chief allocation officer at Wilmington Trust Investment Advisors in Atlanta, Georgia, told Reuters. “While I’m comfortable with the level of the broader market, I don’t think there are obvious bargains. Some may say oil stocks are bargains now, but it’s too soon to say.”
Indeed, there might be worse to come.
“The Saudis seem to be continuing with their game plan to shock prices lower by sticking it to the market that they will put more oil out if they have more customers for whatever price they are comfortable in selling,” John Kilduff, partner at New York energy hedge fund Again Capital, told Reuters.
“It seems like an all-out strategy on their part to finish all the weak players in the market who can’t survive at sub-US$60 or even sub-US$50 oil,” Kilduff added.
Meanwhile, the American housing market showed further signs of falling out of step with an economy that’s otherwise looking buoyant.
A National Association of Realtors report showed purchases of previously owned US homes fell more than expected last month, dropping 6.1 percent to a 4.93 million annual rate. It was the worst reading since May.
“Fewer people bought homes last month despite interest rates being at their lowest levels of the year,” Lawrence Yun, NAR chief economist, said in a statement. “The stock market swings in October may have impacted some consumers’ psyches and therefore led to fewer November closings. Furthermore, rising home values are causing more investors to retreat from the market.”
In Europe, the Stoxx 600 Index finished the session with a 0.5 percent advance from the previous close, as did the UK’s FTSE 100 Index. France’s CAC 40 Index added 0.3 percent, while Germany’s DAX Index rose 0.8 percent.
A European Commission report showed that December consumer confidence in the euro area rose more than expected, climbing to minus 10.9 from a revised minus 11.5 in November.
New Zealand shares rose, led by New Zealand Oil and Gas after it bought a cornerstone stake in ASX-listed Cue Energy. Fletcher Building and Sky Network Television advanced as dual-listed stocks followed the Australian bourse higher. Kathmandu Holdings tumbled after it flagged poor sales across the Tasman, its largest market.
The NZX 50 Index gained 13.989 points, or 0.3 percent, to 5541.739. Within the index, 22 stocks rose, 18 fell and 10 were unchanged. Turnover was a smaller than usual $86.2 million.
New Zealand Oil & Gas climbed 4.2 percent to 62.5 cents after the listed exploration company acquired 19.99 percent of ASX-listed Cue Energy for A$13.96 million from Todd Petroleum Mining, gaining exposure to the Maari field.
“I’m sure it was the little stake in the Maari field that NZO thought was looking cheap,” said Matthew Goodson, managing director at Salt Funds Management. ”They’ve generated an enormous amount of cash out of Tui, and that will continue to operate for many years to come but it’s firmly in decline mode now.”
Across the Tasman Australia’s S&P/ASX200 Index surged 1.5 percent in afternoon trading, extending last week’s gains after economic growth figures for the September quarter were the lowest in three-and-a-half years, leading markets to speculate the Reserve Bank of Australia may have to cut interest rates. Income paying equities gain in a low interest rate environment.
Dual-listed stocks gained. Fletcher advanced 1.2 percent to $8.25. Sky TV climbed 3.3 percent to $6. Auckland International Airport increased 1.4 percent to $4.425. Australia and New Zealand Banking Group rose 1.4 percent to $33.65. Westpac Banking Corp gained 1.2 percent to $34.40.
“There’s a relief rally surge in Australia,” said Goodson. ”We’re starting to see from several of the Australian economists views that the RBA will need to cut rates next year given the weakness of their domestic economy.”
Kathmandu was the worst performer on the day sliding 21 percent to near a two-year low of $2.20 after the outdoor equipment retailer reported a slowdown in sales growth after a subdued start to Christmas shopping in its Australian market.
“Basically it’s a profit downgrade but they don’t say by how much,” Rickey Ward, New Zealand equities manager at JB Were said. “The trading update alludes to Australia showing further signs of deterioration and no imminent sign of improvement. Given a large portion of their earnings come from Australia it has taken a bit of a tumble on that.”
Kiwi Property Group, formerly Kiwi Income Property Trust, fell 2.4 percent to $1.225 after it said it has agreed to buy the Apex Mega Centre opposite its flagship Sylvia Park mall for $64 million as it expands its retail footprint.
DNZ Property Fund was unchanged at $1.89. The property investor’s plans to further expand its Westgate Mall into land opposite the site are being opposed by former landowner Westgate Town Centre Limited, which disputed its right to the development. DNZ said the initial cost of Westgate stage two would be $30 million.
Guinness Peat Group dropped 3.6 percent to 40.5 cents after it said it has received a warning notice over its Coats Pension Plan from the UK Pensions Regulator over the level of support for the superannuation scheme, which looks set to further delay its transition to the UK threadmaker.
Outside the benchmark index, PGG Wrightson rose 1.1 percent to 45 cents. The rural services firm controlled by China’s Agria Corp affirmed expectations for earnings growth in 2015 but is seeing “signs of softness” after Fonterra Cooperative Group cut its forecast farm gate payout. It expects operating earnings before interest, tax, depreciation and amortisation in the year ending June 30, 2015 to be above the $58.7 million it reported in the 2014 year.
“The thing about PGW is they do have a reasonable spread of business. It’s not just a dairy servicing company, they have a reasonable spread across beef and sheep,” Goodson said.
Abano Healthcare gained 1.4 percent to $7.50. The listed healthcare investor boosted first-half profit 51 percent to $3.5 million on increased revenue from its dominant dental business and a turnaround at its unprofitable audiology businesses.
Smiths City rose 3.8 percent to 55 cents after the retailer more than doubled first-half profit to $4.3 million after recognising a $2.9 million insurance payment.
Abano Healthcare, the listed healthcare investor, boosted first-half profit 51 percent on increased revenue from its dominant dental business and a turnaround at its unprofitable audiology businesses.
Net profit after minorities rose to $3.5 million, or 16.89 cents per share, in the six months ended Nov. 30 from $2.3 million, or 12.56 cents, a year earlier, the Auckland-based company said in a statement. Earnings before interest, tax, depreciation and amortisation advanced 7 percent to $13.9 million on an 8 percent lift in revenue to $114.9 million.
“The stronger results were mainly driven by growing revenues and improvements in same store Ebitda across Abano’s dental group and an increase in revenues and reduction in losses from Abano’s joint venture audiology business,” it said.
Last month Abano sold its orthotics business as it seeks to reduce its reliance on public funding, and is expected to incur a loss of some $400,000.
The board declared an interim dividend of 10 cents per share, up from 7.3 cents a year earlier, payable on Jan. 23 with a Jan. 122 record date.
Abano said it faced extra costs of some $350,000 in the period to cover the special shareholders’ meeting and High Court action taken by shareholders Peter Hutson and James Reeves, who sought to spill the board after their aborted takeover bid.
The company’s dominant dental unit lifted gross revenue 12 percent to $105.7 million, for an 18 percent increase in Ebitda to $11.9 million. Its diagnostics segment increased revenue 4.2 percent to $22.1 million for an 8.3 percent gain in earnings to $3.9 million.
The audiology unit turned to an Ebitda profit of 602,000 from a loss of $2.3 million, on 30 percent jump in sales to $19.6 million. The rehabilitation segment’s revenue was largely flat at $5.9 million for an 8.3 percent dip in earnings to $1.1 million.
Abano’s Aotea Pathology unit has tendered for district health board work in the Wellington, Hutt Valley and Wairarapa regions, but warned it if isn’t successful it would need to write of $11 million from the business.
The shares last traded at $7.40, and have gained 16 percent this year.
The New Zealand dollar edged up against the greenback as traders seek higher yielding assets heading into the New Year after the Swiss National Bank signalled plans last week to cut its deposit rate to negative, spurring demand for real returns.
The kiwi increased to 77.58 US cents at 8am from 77.47 cents on Friday in New York, and down from 77.80 cents in Wellington last week. The trade-weighted index was little changed at 78.70 from 78.78 last week.
Switzerland’s central bank will reduce the rate on ‘sight deposits’ to minus 0.25 percent from late January next year in a bid to cap its rising franc, joining European and Japanese policymakers in taking steps to devalue their currencies. That makes currencies such as the New Zealand dollar more attractive to investors seeking higher real returns.
“There’s a clear bunch of currencies that have no yields or negative yields,” said Martin Rudings, senior dealer foreign exchange at OMF in Wellington. “What little yield there is out there, kiwi is probably the highest.”
OMF’s Rudings expects the greenback will continue to appreciate next year as the Federal Reserve embarks on tightening monetary policy, which should reduce the yield advantage the kiwi and Australian dollar have.
Trading is expected to be thin in the next two shortened weeks over the Christmas and New Year holiday period.
The kiwi was little changed at 92.79 yen from 92.78 yen last week, and traded at 95.09 Australian cents from 95.12 cents. It increased to 63.47 euro cents from 63.34 cents last week and was little changed at 49.64 British pence from 49.66 pence. It increased to 4.8252 Chinese yuan from 4.8420 yuan last week.
US Federal Reserve policy makers have helped renew optimism in global equities with their promise to be patient on raising interest rates, triggering a late Santa rally as Christmas approaches.
Fed Chair Janet Yellen suggested the central bank will keep key rates near zero at least through the first quarter of 2015.
That timetable helped lift Wall Street last week: the Dow Jones Industrial Average climbed 3 percent, while the Standard & Poor’s 500 Index rallied 3.4 percent, and the Nasdaq Composite Index added 2.4 percent.
In Europe, the Stoxx 600 Index jumped 3 percent last week, while the UK’s FTSE 100 Index gained 3.9 percent.
“The Fed set the tone and that what’s fuelling the market right now,” Stephen Carl, principal and head equity trader at New York-based Williams Capital Group, told Bloomberg News.
So far in 2014, the Dow has gained 9.9 percent, while the S&P 500 has strengthened 14.3 percent.
The Fed’s message also underpinned the greenback. The US dollar is on track to end the year ahead all except one of its 31 major counterparts, which would be the first time since 1997. And the outlook for the greenback is solid.
“The US dollar looks like the safest currency,” Geoffrey Yu, a senior currency strategist at UBS Group in London, told Bloomberg News. “If you look at price action, if you look at positioning, it looks like people don’t want to own anything else.”
The Canadian dollar, meanwhile, neared a five-year low against the greenback after a report on Friday showed the country’s inflation eased more than expected last month, while the slump in oil prices has raised concern about the impact on economic growth.
Oil posted its biggest advance in more than two years on Friday—still, it came after fresh five-year lows earlier in the week. And the outlook remains shaky.
“If the market keeps going higher, it’ll be a sign for me to sell into the strength,” Tariq Zahir, managing member at Tyche Capital Advisors, told Reuters. He said lower volume over the holidays is likely to exaggerate moves.
Saudi Arabia said on Sunday it would not cut output even if non-OPEC nations did so.
“If they [countries outside of OPEC] want to cut production they are welcome: We are not going to cut, certainly Saudi Arabia is not going to cut,” Saudi Oil Minister Ali al-Naimi told reporters.
Mining and energy stocks have recouped some of their recent losses—though the rebound could prove temporary.
On Friday, the S&P energy index rallied 3.1 per cent, bringing its advance for the week to 9.7 percent, while in London Rio Tinto added 2.1 per cent, BP gained 2.6 percent, Royal Dutch Shell increased 3.1 percent, and BHP Billiton rose 3.6 percent.
“The commodities sector has been punished sharply for quite a while,” Pierre Mouton, who helps oversee US$8 billion at Notz, Stucki & Cie in Geneva, told Bloomberg News. “I don’t believe it is a good long-term investment as commodities will remain under pressure in my view. But at these prices, there are some pockets of value in specific companies.”
US economic data have consistently offered signs of strength. Today, the Chicago Fed will release its national activity index, with existing home sales data to follow. On Tuesday, ICSC-Goldman store sales, durable goods orders, GDP, consumer sentiment, new home sales and the Richmond Fed’s manufacturing index are to be released. On Christmas Eve, there will be jobless claims.
The New York Stock Exchange will close early, at 1pm, on Christmas Eve and it will be closed on Christmas Day. Trading will resume, normal hours, on Friday.
Investors will watch a report on euro-zone consumer confidence, scheduled for release today.
Russia is continuing to add to its stockpile of gold. Holdings of the world’s fifth-biggest gold holder rose to 38.2 million ounces as of December 1, up from 37.6 million ounces a month earlier, the country’s central bank said on Friday.
The country has been desperately trying to shore up its currency, including with an interest rate hike last week, as the ruble hit a record low against the US dollar on December 16.
Steel & Tube Holdings is considering its legal position after an interim judgment found in favour of Lewis Holdings’ $1.75 million claim over a disputed lease contract.
In October, the Lower Hutt-based company denied any legal responsibility for losses relating to a contract lease between former subsidiary Stube Industries, which was liquidated last year, and Lewis Holdings. The interim judgment found in favour of the plaintiff, but didn’t award damages pending further evidence, Steel & Tube said in a brief statement.
Accounting firm McDonald Vague’s Boris van Delden and Peri Finnigan were appointed replacement liquidators of Stube in July last year after the resignation of Stephen Tietjens and Peter Chatfield of Accru Smith Chilcott and applied to the High Court to pool the assets of Steel & Tube as one entity, according to their latest report. Lewis Holdings filed an application for directions in September last year, which the liquidators later joined as second plaintiffs.
The June liquidators’ report said they had received creditor claims of $2.62 million relating to the lease obligation, including the present value of rental payments.
Shares of Steel & Tube were unchanged at $2.90 and have declined 6.4 percent since the start of the year.
Britannia Financial Services, a UK pension transfer agency whose advertisements feature “financial motivator” Brendon Johnson, has tweaked its website and paused television advertising after the Financial Markets Authority raised concerns about people feeling “press ganged” into shifting retirement funds.
The markets watchdog has raised concerns about some advertising which emphasises the need to transfer UK pensions before April 2015 to avoid incoming tax and legislation changes, which may create either a loss of access to the pension fund or a lump sum tax charge to the incoming cash. Alun Rees-Williams, a director at Britannia, told BusinessDesk the company was working with the financial markets watchdog, and in the meantime had put its TV ads on hold until mid-January as well as making a number of changes to its website in October, with further changes implemented today.
“Everyone who advertises at all around the transfer of UK pensions funds to New Zealand comes under that warning,” he said. “We have been working with the FMA up to this point in relation to our advertising. We have been obviously working with them in conjunction with Chapman Tripp and Stategi in Auckland just to make sure we’re not doing anything that’s misleading or deceptive which is what the FMA are talking about.”
Yesterday, the FMA said it was concerned the sense of urgency will cause false alarm and has asked for some materials to be removed from publication, it said in a statement that did not single out any one provider.
“We are concerned that people are feeling press-ganged into transferring their pension scheme entitlements from the UK and being put under pressure to act now,” said Elaine Campbell, the FMA’s director of compliance said in a statement. “We are concerned that tax issues and a misleading sense of urgency are being exploited by some providers to scare people into transferring their money, without offering a balanced view of the potential pros and cons involved.”
One New Zealand-based UK pension transfer adviser, who didn’t want to be identified, said the culprits of deceptive advertising were mainly British companies based in Spain and that although the regulator may have concerns, their business was to inform people of the changes. They said their business had not been contacted by the FMA.
A spokesman for the FMA said a number of New Zealand-based business had been contacted, but declined to name them.
Rees-Williams didn’t think there was a problem with misleading advertising in the industry and that pension transfer companies were acting “in good faith” to let people know about changes in UK and New Zealand tax and legislation.
“I can’t speak for anyone else, I can speak for Britannia and we’ve always tried to remain factual with our advertising. We’ve never put anything deliberately misleading or deceptive in an advertisement at all,” Rees-Williams said. ”Is there a problem? Personally I don’t think there is but the FMA are just trying to make sure that everyone has a balanced approach. Yes, there are reasons to transfer your pension, and yes there is reason to leave them behind. ”
The FMA notes that ‘old age’ state pensions provided by the UK government at retirement are not transferrable, so this warning does not apply to these pensions.
Stuart McLean will join the executive team at Trade Me Group, the online auction site, after Xero, the cloud-based accounting firm, ditched his former role as chief revenue officer.
The disestablishment of the chief revenue role comes after the Wellington-based software firm appointed Andrew Lark, former Commonwealth Bank of Australia executive as chief marketing officer, it said in a statement. Earlier this year, Xero’s North America chief executive Peter Karpas left the company suddenly, less than a year into the job, as the company reworked its US growth plans.
McLean had worked with the company since May last year, having previously been Google’s head of enterprise for Australia and New Zealand, according to his LinkedIn profile. McLean will join the Wellington-based auction site in February, leading its general items marketplace.
“We continue to shape our executive team and organisation to reflect the rapid growth of our business globally,” said Rod Drury, Xero’s chief executive. “Stuart has done an outstanding job as CRO, where he was responsible for both sales and marketing, contributing positively to our growth to over $US100 million annualised revenue and over 400,000 customers. We are delighted Stuart will be able to contribute to another great NZ technology company.”
Shares of Xero last traded at $15.50 and have plunged some 66 percent from its March peak of $45.99 Trade Me stock last traded at $3.52 and has fallen 13 percent since the start of the year.
The Commerce Commission has pushed out the timeline for a final decision on what price Chorus can charge on its copper line network as it deals with a large amount of complex information, and said its initial view is that the regulated price should be backdated no further than the start of December this year.
The competition regulator expects to make a final decision on what Chorus can charge on the unbundled copper local loop (UCLL) and for unbundled bitstream access (UBA) in September next year, extending its initial target to have it settled in April, it said in a statement. The delay comes after the commission was asked for more time by interested parties, including Chorus, Spark New Zealand, Vodafone New Zealand and CallPlus, who wanted to make submissions. The draft determination increased the allowable regulated monthly price to $38.39 from the $34.44 level set by an earlier decision and which came into effect from Dec. 1.
“We appreciate that there is a large volume of complex information for submitters to review so we have agreed to a four-week extension to the consultation period,” Telecommunications Commission Stephen Gale said. A conference on the issues would now be held in April 2015.
The commission also said its initial view is that the final price should be backdated to Dec. 1, 2014, but not earlier, and is seeking submissions on the issue.
The regulator considers that backdating the price to the cross-over from the price freeze that was put in place to let Chorus adjust from being part of the wider Spark, then Telecom Corp, best serves the legislation’s stated aim to encourage investment.
“One potential concern in the case, where backdating would favour Chorus, is that if the amounts involved are substantial enough, they could cause a firm to exit the market, which would likely be detrimental to competition,” the regulator said. “We intend to forecast the impact of potential backdating on retail service providers, and consider this when making our final decision on backdating and whether there are mechanisms that could mitigate those impacts.”
Spark, Chorus’s biggest customer, increased its retail prices in response to the draft price, saying it faces an extra $60 million annual bill to its input costs, and that backdating the new price means higher prices won’t fully cover the increased wholesale costs.
The combined UCLL and UBA services dictate the base cost for provision of broadband internet services over the copper network, which competes with fibre-optic cable-based services that are becoming available under a government-subsidised national roll-out, the majority of which is being installed under contract by Chorus.
Chorus had sought the commission’s reworking of regulated charges because it argued lower than anticipated monthly charges for copper-based broadband services would frustrate the government’s policy goal of rapid public uptake of UFB.
The new draft rate, which does not yet apply and is subject to further submissions from the industry, is still $6.49 per month lower than the $44.98 monthly rental for UCLL and UBA that had applied until the start of this month.