Stocks fall, sending NZX 50 down 2.5%, following global rout
By Jason Krupp
Aug. 5 (BusinessDesk) - New Zealand stocks joined a global selloff in equity markets and government bonds rallied amid concern more European nations will be dragged into the sovereign debt crisis, nudging the world back toward recession.
The NZX 50 Index shed 80.89 points to 3297.86, the lowest level in eight months. The decline in the local market is milder than on the major indexes in Europe and the U.S., where the Standard & Poor’s 500 Index tumbled 4.8%.
NZ Oil & Gas tumbled 5.8% to 65 cents as the price of oil declined, leading decliners on the benchmark index. Exporters paced the slide with Rakon down 4.3% to 89 cents and Fisher & Paykel Appliances falling 4.2% to 57 cents. Telecom shed 2.6% to $2.585 and Fletcher Building, the biggest company on the exchange, dropped 2% to $7.85.
Fears of global recession were triggered when the European Central Bank dashed market expectations by saying it would not buy Italian and Spanish bonds in a bid to keep yields on 10-year securities below the sustainable level of 6%.
So-called safe haven assets saw renewed buying, with reports that New York banks were charging investors to place deposits. Demand for government bond spiked, with yields on U.S. two-year Treasuries at an all-time low 0.27%.
New Zealand’s benchmark 10-year bond yield tumbled 24 basis points to 4.53 and three-year swaps fell 10 basis points to 2.57%.
"Our market shouldn't be as affected as what happened overseas," said Alan Moore, who manages $600 million in equities for Milford Asset Management. "If it did, I don’t think it would last long as people would be looking for some big bargains."
Australia & New Zealand Banking Group, the country's biggest lender, fell 4% to $2.10.
Pumpkin Patch, the children's clothing chain, fell 3.9% to 98 cents. Kathmandu Holdings, the outdoor clothing and equipment retailer, fell 3.5% to $2.20.
Steel & Tube Holdings, the construction material supplier, fell 3.7% to $2.36.