Broader NZ Market Witnesses Significant Selling

Image Souce: Krish Capital Pty Ltd

Index Update: On 22^nd October 2024, the broader NZ market closed lower as IT sector witnessed significant selling pressure. On the same day, S&P/NZX 50 Index declined by 0.85% to end the session at 12,813.150 and S&P/NZX 20 Index fell by 0.82% to 7,736.910. Also, S&P/NZX 10 Index encountered a fall of 0.75%. Notably, S&P/NZX All Information Technology declined by 2.32% to 2,679.040. On the other hand, S&P/NZX All Financials increased by 0.62%.

Macro Update: Stats NZ stated that seasonally adjusted industry and household greenhouse gas (or GHG) emissions rose 1.1% in the June 2024 quarter. The increase of 224 kilotonnes during the quarter was because of more emissions from industry, mainly from the electricity, gas, water, and waste services industry. Over this quarter, industry emissions (excluding households) rose by 1.7% (or 292 kilotonnes). By comparison, GDP, which accounts for industry production, declined 0.2% in the same period.

Top Market Movers: Among top gainers, Trade Window Holdings Limited (NZX: TWL) rose by 15.00% to close the session at NZ$0.230 per share and Accordant Group Limited (NZX: AGL) increased 8.00%. On the other hand, Blis Technologies Limited (NZX: BLT) declined by 7.14%.

Commodity Update:  On Tuesday, the U.S. dollar remained strong at a two-and-a-half-month high, driven by expectations of a cautious approach to interest rate cuts by the Federal Reserve. At the same time, uncertainties surrounding the upcoming U.S. election kept investors alert. In the commodities market, gold rose 0.27% to $2,745.15 per ounce, silver climbed 0.42% to $34.42, and copper increased by 0.35% to $9,605.50 per ton. However, Brent crude futures dipped 0.3% to $74.03 amid renewed calls for a ceasefire in the Middle East and ongoing sluggish demand from China, the world's largest oil importer.

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 selling in the IT sector. It seems that the fall in broader NZ equities was due to the expectations that interest rates are likely to remain "higher for longer". On 21^st October, Dow Industrials witnessed a fall of 0.80% to end the session at 42,931.60. Moreover, the US 10-year yields also witnessed an increase. Moving forward, the global and NZ equities are expected to be impacted by the macro-economic updates.