Muted NZ reaction to cliff deal

00:41, Jan 03 2013

The New Zealand sharemarket continues to march to the beat of its own drum, posting a muted reaction to the successful 11th-hour fiscal cliff negotiations in the United States.

On New Year's Day, the US House of Representatives passed a crucial Senate bill aimed at stopping the economy from tumbling over the fiscal cliff.

US stocks surged well over 2 per cent on the news, and the Australian exchange rose 1.2 per cent to mark its biggest gain in five months.

But the mood was more restrained on the New Zealand exchange, which opened this morning for the first time this year. The benchmark NZX 50 index rose 22.03 points, or 0.54 per cent, to 4088.54 as at noon.

Hamilton Hindin Greene director Grant Williamson said the local market had not got carried away with the global euphoria.

"Given a number of weeks, the same worries and uncertainties are going to be there regarding the fiscal cliff. The Americans have put a band-aid on the problem, but they're yet to really come up with any long-term solutions."

The bill has made permanent income tax cuts that were due to end in 2013, allowed a payroll tax cut to expire and put off automatic spending cuts for two months. 

Williamson said local investors were more concerned with realigning their portfolios for the year and following events closer to home.

"[Last year] we weren't influenced by the offshore markets by the same degree that we maybe had been in the past," he said.

"I think we're probably going to follow that trend again in 2013."

Mint Asset Management portfolio manager Shane Solly said the NZX gaining 0.5 per cent was not a bad outcome.

"What drove the US market up was financials, technology, industrial - a lot of quite US-specific components. It doesn't really surprise me that we're lagging the rally."

He said the New Zealand market tended to "go to the beat of its own drum", insulated by a relatively stable environment for companies to operate from.

While the financial diary ahead has hit a lull between major geo-political announcements, Solly said there would inevitably be more to come.

"There are global issues still to be dealt with and will be for some time - that's a statement I could have made a year ago."

He said other market-moving factors to watch for would be the December-January retail results.

The broadly buoyant mood on the NZX saw five stocks rise for every one that fell in the first two hours of trade.

Retirement village operator Ryman Healthcare led gainers, up 3.3 per cent, while Telecom slid 2.4 per cent.

A total of 6.4 million shares changed hands on the benchmark index this morning, paced by heavy trading in rural services company PGG Wrightson.