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Omicron and inflation risks flatten share market

New Zealand shares held steady as a strong gain from Synlait Milk offset global market jitters after the US Federal Reserve chair said the risk of high inflation could see the bank tighten policy.

Wednesday, December 1st 2021, 6:15PM 1 Comment

by BusinessDesk

The S&P/NZX 50 Index closed virtually unchanged, up just five points at 12,724.91. Turnover was $196 million.

US markets fell overnight after Jerome Powell told US Congress he wouldn’t describe inflation as “transitory” as it could linger into next year.

Major equity indices were down after the comments gave Asian markets a soft start on Wednesday. NZ shares traded lower for most of the day but snapped back in the closing auction.

Conflicting commentary about the dangers posed by the omicron covid variant has also been causing some trepidation among investors.

Moderna’s chief executive predicted a “material drop” in the efficacy of existing vaccines, while BioNTech’s executive said the vaccines will likely still offer “substantial protection”.

For what it is worth, NZ’s own Peter Gluckman – a biomedical scientist – said in a webcast today that he expects the vaccines will be “good enough” against the variant.

Synlait Milk was key to propping up the NZX 50 today, the stock jumped 5.6% to $3.38 after its annual shareholder meeting. 

Chief executive John Penno said the dairy processor was confident it can generate "robust" profit over the coming years but anticipated A2 Milk's orders for infant formula would only edge up at best.

Shares in A2 Milk fell 2.3% to $5.97 today and are now down 2.1% in the past six months.

Restaurant Brands and Sky Network Television both gained 4.2% to $15.15 and $1.77, respectively.

Tim Agar, a research analyst at Jarden, wrote in a note that companies with the ability to raise prices are likely to outperform while inflation remains high.

Agar said higher inflation was good for equities when it was accompanied by economic growth and increased sales volumes but becomes a problem when growth slows. 

“Since March 2021, when concerns about rising costs intensified, sectors, where strong pricing power companies have performed best, include industrials and consumer discretionary,” he said.

Telecommunications firm Spark New Zealand had the day’s biggest decline, falling 2.4% to $4.49.

Serial investor Colin Neal was today revealed to have bought a $1.6m stake in Move Logistics, but its price remained unchanged at $1.72.

Neal told BusinessDesk he wasn’t getting personally involved in the business but thought it was heading in a good direction.

Residential property developer Winton Property will give investors an early Christmas present in the form of a $250m to $350 public offer in the last full week before the holiday. 

The NZ dollar mounted a recovery from overnight lows of 68.18 US cents and was trading at 68.50 by the end of the day as risk tolerance improved.

Tags: Market Close

« NZ shares bounce from omicron sell-offOmicron in the US hits market »

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Comments from our readers

On 1 December 2021 at 10:16 pm JohnsmithK said:
Investors seemed less worried about the Omicron threat as the stock and oil prices surged. However, on Friday, markets reacted with caution as the news of a new variant emerged from South Africa.As markets waited with bated breath about the virus’s transmissibility, President Joe Biden announced on Monday that it was not a “cause for panic”. Meanwhile, Israel and Japan said they are temporarily banning foreign travellers from entering the country. Under the UK’s red list of international travel, the administration has added 10 countries including South Africa, Zimbabwe, Namibia, Angola, Eswatini, Botswana, Zambia, Mozambique, Malawi and Lesotho.

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