Shane Solly, portfolio manager at Harbour Asset Management, said the US announcement of the blockade caused oil prices to jump back up, and New Zealand bond yields also increased.
“Trump seems unconcerned about whether Iran returns to the table for the peace talks – and Asian markets came off the boil,” he said.
The NZ 10-Year Government Bond yield increased nearly 5 basis points to 4.768%.
The oil price was back over US$100 (NZ$171.66) a barrel, with Brent Crude trading at US$102.2 at 6pm NZ time.
At home, ANZ is predicting three 25-basis-point hikes in the Official Cash Rate (OCR) in July, September, and October, taking the rate to 3%.
“We see the Reserve Bank becoming too uncomfortable with an OCR in stimulatory territory as inflation inevitably rises, concluding the risks of going too late outweigh the risks of hiking too soon – as long as the OCR is not considered contractionary,” ANZ said.
Solly said there had been discussion of pre-emptive OCR hikes to get to the neutral rate of 3% earlier, “so you don’t have to go harder later on.
”The real economy may struggle to absorb the rate increases in combination with continuing fuel issues, and there is a risk of returning to a recession.”
ASB Bank is forecasting the first OCR increase in September, brought forward from December, with an end-point of 3.25% by mid-2027.
Local stocks
Infant milk supplier a2 Milk slumped $1.39 or 12.4% to $9.82 after downgrading its full-year earnings guidance by more than 10% because of chain supply and production impacts.
The company told the market it was currently experiencing temporary in-market product availability, primarily relating to shortfalls of China-label infant formula at distributors and retailers.
Inventory levels have been low throughout the financial year, and there remains a significant backlog of unfilled purchase orders from Synlait with less capacity to catch up following the sale of its North Island plant.
A2 Milk expects lower China label formula sales and additional one-off supply chain costs in the second half, and is now forecasting low-to-mid double-digit revenue growth, down from previous guidance of mid-double-digit percentage growth.
Net profit is expected to be similar to last year’s of $202.9m, and operating earnings margin is likely to be 14-14.5%, down from 15.5-16%.
Synalit, unchanged at 42c, said it continued to rebuild customer inventory following the previously reported manufacturing challenges, and production has recently returned to targeted levels.
Solly said it was a tough update by a2 Milk driven by supply chain disruption. “Demand is still strong in China, but it’s taking more time to get their product in there.
“The a2 Milk update is a reminder that we haven’t seen downgrades from companies as a result of the Middle East conflict,” he said.
Fonterra payout due
More than 9000 Fonterra Co-operative farmer/shareholders will this week receive an average of $400,000 in cash from the $3.2 billion capital return following the sale of the Mainland Group to French dairy company Lactalis.
Fonterra also announced the appointment of its well-regarded global ingredients president of Atlantic, Richard Allen, as the new chief executive to replace Miles Hurrell on May 1. Hurrell will stay on as an adviser until September.
Allen joined Fonterra as a graduate in 2008 and has been mainly involved with the global supply chain.
Fonterra Co-operative was up 24c or 5.74% to $4.42, and the shareholders’ fund fell $2.25 or 26.79% to $6.15, representing the $2 a share capital return and special dividend of 16c a share.
Fisher & Paykel Healthcare was down 72c or 1.87% to $37.82; Mainfreight declined $1.36 or 2.27% to $58.64; Napier Port decreased 7c or 1.94% to $3.53; Scales Corp shed 14c or 2.34% to $5.84; and Tourism Holdings fell 19c or 8.33% to $2.09.
Retirement village operators Summerset was down 18c or 2.02% to $8.75; Ryman Healthcare shed 5c or 2.4% to $2.03; and Oceania Healthcare declined 2.5c or 3.47% to 69.5c.
Sky TV declined 11c or 3.47% to $3.06; Vulcan Steel shed 21c or 3.09% to $6.59; and Winton Land eased 5c or 2.75% to $1.80.
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