Prices sink to their lowest point for the year

New Zealand stocks buckled under the weight of rising bond yields, taking the market to its lowest point for the year to date. By the close, the S&P/NZX50 index was at 10,994.08, down 141.505 points or 1.27 per cent.

At $115.1 million, turnover was light, and there were 94 falls and 33 rises among the 185 stocks traded on the main board.

The index is now 2564 points, or 19 per cent, down from its record close of 13,558.19 on January 8, 2020.

Comments from US Federal Reserve Chairman Jerome Powell to the effect that persistently high US inflation and tight labour markets could warrant further interest rate increases were enough to put the skids under US and other markets.

Key US 10-year bonds are now just under 5 per cent and US 30-year mortgage rates are at their highest point in 23 years.

New Zealand 10-year government bonds now trade at 5.58 per cent, having started the month at 5.42 per cent.

“Bond yields have continued to put pressure on across the capital markets and there are very few places to hide,” said Harbour Asset Management portfolio manager Shane Solly.

In addition, geopolitical uncertainty continued to drive oil prices higher, with Brent crude hitting US$93 a barrel.

Overseas merchandise trade statistics for the September quarter, showing exports fell $1.4 billion (8 per cent), did little to aid sentiment.

High bond yields and exchangetraded fund (ETF) rebalancing on the back of changes to the iShares Global Clean Index weighed heavily on the big power companies, which was the main drag on the market, Solly said.

Meridian was the biggest loser, falling 23 cents or 4.5 per cent to $4.85.

Contact Energy fell 7c to $7.88, Mercury NZ dropped 19.5c to $5.85 and Manawa Energy lost 12c to $4.35.

Genesis Energy, which said it planned to cut retail job numbers by 200 over the next two years, bucked the trend by firming 2c to $2.44.

“They [Genesis] are talking about getting costs out and this is something that we should be thinking about for a number of businesses across New Zealand,” Solly said.

Genesis will release details of its future strategy on November 30.

Brokers Forsyth Barr, in a research note, said the electricity sector appeared to have “defied gravity” over the past two years. “Our analysis suggests the risk of a negative share price reset is rising with a growing risk of earnings downgrades — from 2027 onwards.”