NZX 50 gains 0.74%, overcomes a2 Milk slip

The benchmark S&P/NZX 50 recovered early losses, finishing up 0.74% on 12,859.02 points. About 41 million shares changed hands, worth $170.6m.

Salt Funds managing director Matthew Goodson said the market “felt stronger under the hood” than it seemed on the surface.

“We are starting to see some of the KiwiSaver tax credits invested in the market this month, and it feels like some of those are starting to come through,” he said.

Dragging the index down was a2 Milk, which sank 3.68% to $8.38 on volumes worth nearly $8m. 

Goodson noted that China-based infant-formula maker Feihe Milk issued a profit warning earlier in the week, which he said had "spilled over" into a2 Milk.

The Hong Kong-listed Feihe Milk dropped sharply on Monday and was down another 3% at midday local time.

Goodson said the downgrade happened “despite the Chinese government making suggestions that it could offer further subsidies for couples who have new babies”.

Movers

Summerset Group’s shares rose 3% to $12 after a trading update in which it disclosed it had broken its quarterly sales record.

Jarden equities analyst Arie Dekker said he would wait for more details about the sales mix at Summerset’s full-year result on Aug 28, but that the update was positive.

“Against the backdrop of more elevated industry inventory levels and a drop in sales momentum for Ryman over the last six months, Summerset produced a very solid result.”

KMD Brands, which owns Kathmandu, Ripcurl and Oboz Footwear, was up 5.77% to 27.5c cents on low volumes and remained down over 35% in the year to date.

Forsyth Barr analysts Paul Koraua and Rohan Koreman-Smit released a note in which they said cooler weather had helped drive June sales in both New Zealand and Australia, and that Google search interest in Kathmandu rose in June.

They said May to July was the most significant trading period for Kathmandu, making the remaining three weeks of the month particularly important.

Goodson also highlighted property stocks which performed well across the board, with Stride Property leading the pack, up 4.2% to $1.24.

“There's no particular news driving that. From recent valuation updates, it does seem that valuations in the sector have bottomed out, and modest rental growth is continuing.”

Overseas

Just before close, the Reserve Bank of Australia held rates at 3.85% in a move that Goodson called “surprising”.

The ASX 200, which had been trading relatively flat, quickly dropped after the announcement. At 5pm, it was 0.26% down.

Meanwhile, overnight, United States President Donald Trump signed an executive order delaying the start of his proposed reciprocal tariffs, pushing back a deadline that had been set to expire on July 9.

At the same time, the White House dispatched letters to several countries, including Japan and South Korea, warning of specific tariff rates they would face unless they reached trade agreements by Aug 1.

After falling 0.8% on Monday, S&P 500 futures were trading flat in the early evening on Tuesday.

Looking ahead, Goodson said the Federal Reserve would be searching for evidence that the tariffs were starting to feed through to inflation.

“Over the next few weeks, that'll be one of the critical things that the markets will be watching out for,” he said.