Shares, dollar down as unemployment rises

Fletcher Building sank to the lowest in almost six months, pacing a second day of declines on the NZX 50 Index, as an unexpectedly large jump in the jobless rate added to evidence of a sluggish economy.

The NZX 50 fell 3.66, or 0.1 percent, to 3034.46, extending its retreat from the six-week high reached with Tuesday’s close. With companies preparing to post their annual or first-half results, investors are bracing for bad news as prospects of a recovery are pushed further out.

Fletcher fell 1.2 percent to $7.48, the lowest since Feb. 15. The biggest company on the bourse had a subdued second half and faces a lull in non-residential construction, according to Forsyth Barr analyst Rob Mercer.

Kathmandu, the outdoor equipment retailer, fell 1.7 percent to $1.79, adding to yesterday’s 12 percent slump after it said gross margins fell short of last year’s forecast at 63 percent, which is below both the 64.4 percent result in the previous year and 64 percent prospectus figure.

AMP NZ Office Trust fell 1.4 percent to 71 cents on concern it will struggle to fill spaces in some of its key commercial buildings as leases expire.

NZ Farming Systems Uruguay, which is awaiting a firm takeover offer from Olam International at 55 cents, dropped 1.8 percent to 56 cents today. Fonterra, the world’s largest dairy exporter, said yesterday it may have to reduce its forecast payment to farmers because of weakening in global dairy prices and the strength of the New Zealand dollar.

The kiwi plunged 0.8 percent to US72.84 cents after unemployment unexpectedly surged 0.8 percentage points to 6.8 percent in the three months through June.

Though economists were predicting a rise in the jobless rate, this week’s relatively benign employment data that is a pre-cursor to the Statistics New Zealand’s household labour force survey had pundits picking an improving outlook for the labour market.

The data showed a 0.3 percent decline in employment, putting it at odds with Tuesday’s quarterly employment survey, while the participation rate was steady at 68 percent. Goldman Sachs & Partners economist Philip Borkin said the volatile statistics were unfortunate, as they made it difficult to interpret the data.

Shares of Telecom were unchanged at $2.01 after Standard & Poor’s put the company on CreditWatch Negative, giving it a one-in-two chance of a downgrade over the next three months.

S&P said Telecom’s announcement that structural separation was part of its bid to tap the government for $1.85 billion to roll-out ultra-fast broadband throughout the nation, while losing some of the costs associated with the regulation of its existing copper network made the restructure more likely to take place, and at a faster pace.

Forsyth Barr analyst Guy Hallwright said S&P’s move was natural given the amount of uncertainty as to how Telecom might allocate its debt between the demerged units, and it might end up having to repay its issuance to ensure debt-holders aren’t disadvantaged in any way.

New Zealand Post Group, the state-owned postal service and owner of KiwiBank, said one-off charges to write-down the value of its mail and parcel operations wiped out profit in the year ended June 30.

Much of the adjustment was a single-year impact, with 2011 net profit forecast to be $60 .8 million, rising to $84.3 million in 2012. Operating profit in the year ended June 30 fell 6.7 percent to $72 million, missing the $80.8 million forecast in its 2009 statement of corporate intent.

- BusinessDesk