MARKET CLOSE: Sharemarket remains flat

Tuesday 14th December 2010

The New Zealand sharemarket remained flat today as the focus remained on the economy after the release of further soft data and a gloomier outlook from the Government and economists.

The benchmark NZX-50 closed down 2.33 points at 3288.96, after gaining 18 points yesterday.

Market leaders were mixed, with Telecom (NZX: TEL ) up 2c at 212, Fletcher Building (NZX: FBU ) up 2c at 785, Contact Energy (NZX: CEN ) a cent lower at 617 and Infratil (NZX: IFT ) down 2c at 187.

Shares in small cap rubber goods maker Skellerup (NZX: SKL ) rose after the New Zealand Exchange announced the stock would move on to the NZX-50 index, replacing Pike River Coal which went into receivership yesterday.

Pike River would be removed from all its equity indices, while Skellerup's position on the NZX-50 would be effective from December 20, NZX said.

Shortly after the market opened today, Skellerup shares were up 5c to 104, its highest level in 3-1/2 years. The stock closed up 4c.

The New Zealand dollar hit a decade low against the Australian dollar on the back of weak retail sales data and then the release of the Government's six-monthly economic and fiscal update.

Seasonally adjusted retail sales fell 2.5% in October - more than reversing September's 1.7% gain, weaker than expectations and the largest decline in percentage terms in more than 13 years.

Core retail sales, which exclude the motor vehicle-related industries, fell a seasonally adjusted 1.6% in October from September, when it had lifted 1.7%.

That was followed by Government financial forecasts published today seen as showing politicians in a "fiscal straitjacket" heading into next year's election.

Treasury's update showed the government deficit to peak at 5.5% of GDP in the June 2011 year, above the 4.2% forecast in the 2010 budget.

The Government was still heading for a fiscal surplus in 2015/16, as forecast in the 2010 budget, despite one-off costs including $1.5 billion for the Canterbury earthquake, and slower than expected economic activity.

The sharemarket reaction was negligible. Retailers were subdued, with The Warehouse (NZX: WHS ) down 3c at 372, Hallenstein Glasson (NZX: HLG ) flat at 417 and Pumpkin Patch (NZX: PPL ) down 4c at 170.

Restaurant Brands (NZX: RBD ) was unchanged at 261 despite a 1.8% rise in third quarter sales.

Port of Tauranga (NZX: POT ) was down 3c at 742, carpetmaker Cavalier (NZX: CAV ) was down 5c at 303, and NZ Oil and Gas (NZX: NZO ) was down 2c at 85.

Kathmandu (NZX: KMD ) was up 4c at 170, Steel and Tube (MZX:STU) rose 2c to 211 and Ryman Healthcare (NZX: RYM ) gained a cent to 225.

Shares were flat across the Tasman as well, with Australia's S&P/ASX 200 Index up 5 points at 4762.

Earlier in the US, a late selloff pushed stocks to session lows at the close, dragged lower by declines in technology and other sectors, with the Nasdaq Composite ending an eight-day winning streak.

NZPA

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