Oil, Inflation And Rising Yields Hit Markets — NZ Investors Brace For A Softer Open

After Wall Street pulled back from record highs overnight and global growth stocks came under pressure, the NZX 50 looks set for a softer open this morning. Rising oil prices, hotter US inflation, and higher bond yields are likely to keep local investors cautious at the open.

US markets lost momentum after April inflation came in hotter than expected, reducing hopes of any Federal Reserve rate cuts this year. With an hour to the US market’s closing bell, the S&P 500 fell 0.4%, while the Nasdaq dropped 1.3% as semiconductor and AI leaders came under profit taking. The Dow Jones was the relative outperformer, adding 55 points as investors rotated into defensive sectors including healthcare, financials, and consumer staples. Despite the pullback, volatility remained contained, with the VIX falling 1.6% to 18.1, suggesting the move was more about sector rotation than panic selling.

One of the biggest overnight moves came from commodities and bond markets. WTI crude surged 4.7% to US$102.66 a barrel as tensions between the US and Iran continued to escalate around the Strait of Hormuz. At the same time, US Treasury yields moved higher, with the 2-year rising to 3.99%, the 5-year to 4.12%, and the 10-year to 4.46%, reflecting growing concern that sticky inflation could keep rates elevated for longer. Gold eased 0.6%, while silver added 0.7%, highlighting a mixed reaction across safe-haven assets.

Technology was the weakest area of the US market, with Qualcomm, Intel, Micron Technology and Applied Materials all lower as higher yields pressured valuations. Healthcare and pharmaceutical names outperformed, helped by ongoing virus-related headlines. Meanwhile, RKLB gained 1.7% and remains one of the most watched names for Kiwi investors.

Back home, the NZX 50 fell 1.0% yesterday to 13,080, with healthcare once again dragging on the benchmark after weakness in Australia’s CSL flowed through local names. Fisher & Paykel Healthcare fell 2.9%, while Ebos Group also weakened. Infratil gave back some recent gains, while The a2 Milk Company led the benchmark lower.

Local attention today should focus on:

• Fisher & Paykel Healthcare and Ebos Group after heavy selling yesterday, especially with US healthcare stocks outperforming overnight.
• Infratil as rising bond yields could pressure infrastructure and growth valuations.
• Energy and utility names such as Meridian Energy and Mercury NZ as oil breaks above US$100.
• Exporters including Scales Corporation, Sanford and The a2 Milk Company as investors monitor China demand ahead of President Trump’s expected China visit later this week.

For Kiwi investors, today’s session looks likely to be driven by higher energy prices, rising global yields, and whether defensive sectors can offset weakness in growth.

Market commentary by Greg Boland.

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