Broader NZ Market Ends in Red Amidst Selling in Materials Sector

Image Souce: Krish Capital Pty Ltd

Index Update: On 23^rd October 2024, the broader NZ market ended in red amidst sell-off in the materials sector. On the same day, S&P/NZX 50 Index declined by 0.20% to end the session at 12,787.600 and S&P/NZX 20 Index fell by 0.13% to 7,727.120. Also, S&P/NZX 10 Index witnessed a fall of 0.36%. S&P/NZX All Materials encountered a decline of 2.79% to end at 1,160.170. However, S&P/NZX All Communications Services rose by 1.27%.

Macro Update: In the release by RBNZ dated 9^th October, the Monetary Policy Committee agreed to cut the OCR to 4.75%. It was mentioned that some exporters have benefited from improved export prices. However, global economic growth is below trend. The outlook for the US and China is for growth to slow, while geopolitical tensions can act as significant headwind for world economic activity.

Top Market Movers: Among top gainers, Trade Window Holdings Limited (NZX: TWL) witnessed a rise of 21.74% to end the session at NZ$0.28 per share and New Talisman Gold Mines Limited (NZX: NTL) rose by 14.29%. On the other hand, KMD Brands Limited (NZX: KMD) declined by 5.15%.

Commodity Update:  Gold prices reached a record high on Wednesday, while the dollar strengthened as investors remained cautious ahead of the contentious U.S. election. Uncertainty surrounding the Federal Reserve's plans for interest rate cuts weighed on risk sentiment. After peaking, gold slipped 0.25% to $2,753.00 per ounce, silver fell 0.83% to $34.75, and copper decreased 0.48% to $9,578.00 per ton. Brent crude futures dropped 0.4% to $75.75 a barrel, impacted by rising U.S. oil inventories, while U.S. diplomatic efforts in the Middle East continued to attract market focus.

Source: Trading View, Analysis: Kalkine Group

In July 2024, the S&P/NZX 50 index broke above both the neckline of a Head and Shoulders pattern on the daily chart and a key resistance level at its 2023 high. This breakout suggests that the uptrend, which began in November 2023, is likely to continue and may drive the index toward its 2021 historical high. Moreover, the index recently surpassed its previous peak, providing more support to the previous recommendation. Additionally, the 14-day Relative Strength Index (RSI) is trading above its midpoint, indicating positive market sentiment in the short term.

Our Stance: It could be said that the NZ market was impacted by the decline in materials sector. Moving forward, the global economic uncertainties, mainly related to the trade policies and upcoming US elections, might impact sustained growth. Therefore, the investors are required to be cautious as macro-economic developments can lead to fluctuations in the broader global and NZ equities. On 29^th October, Stats NZ would be releasing information about business count indicators (September 2024).