Market barometer: Sharemarket tone firms on weak currency and takeover talk

Friday 12th May 2000

NYSE high beta index

Sharemarkets are still battling to find their feet in the wake of last month's Nasdaq selloff shock.

Increased likelihood of higher US interest rates to be announced by the US federal open markets committee on May 16 stems from extremely low US unemployment rates. A robust American economy does suggest higher corporate profits could offset raised interest rates to some extent.

The Dow Jones industrial average seems to be weaving about a median level of 10,500. Its sister index, the Dow Jones transportation average, looks to be supported at 2800.

The Nasdaq is edging up again but has implied resistance at 4000. The New York Stock Exchange's high beta index of high-volatility stocks is impressively firm (illustrated).

London's FTSE-100 is supported at 6200 in the aftermath of announcing the UK stock exchange's impending merger with the Frankfurt bourse. Australia's all ordinaries index seems to be capped at 3100 resistance.

The New Zealand sharemarket's tone is firmer, possibly because of rife takeover rumours due to our weak dollar and perhaps also due to the Stock Exchange's tardy confession it is booked in for a shotgun wedding sometime soon. However, even without talk of takeovers, at some point the combination of a weak currency with high stock dividend yields would lure foreign money.

It should be noted that contribution to large-cap index pick-up by Lion Nathan is a false friend due to that company's impending departure to Australia. Lion has leapt from resistance at 360cps to a target of at least 480cps since announcing transfer of its primary listing to the ASX. Other major listed New Zealand corporates will now look abroad to boost their share values.

Telecom could be swinging back up to the 90cps mark. Carter Holt Harvey has found support again at 180cps. Contact Energy is enjoying re-rating up toward 260cps. Fletcher letter stocks are mixed. Paper is inching up to 240cps and Energy seems headed for 550cps. Forests is slumping toward 80cps, perhaps on recognition of the difficulty of finding a buyer when its prickly partner Citic is taken into consideration. Building is weak at around 200cps. IT stocks are down, but consolidating, to judge by Advantage Group's rebound above 300cps and Baycorp's lift away from the 900cps zone.

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