Devon Funds Management’s Greg Smith said a somewhat messy economic outlook has become even messier with the developing situation in the Middle East.
“Oil prices have rallied US$10-US$15 [$16-$25], about 20%, so that is putting pressure on the inflationary outlook. Often wars are a very temporary boost to inflation but it’s just yet another layer of uncertainty with the trade situation unresolved,” Smith said.
“It’s hard to think that the Fed will do anything drastic, although I think arguably we could see a more dovish statement from Jerome Powell given the soft economic data of late. Obviously he’s getting pressure from [Donald] Trump to cut rates but it’s hard to see that happening at this meeting.”
Domestically, data out tomorrow is expected to show that New Zealand’s economy grew by 0.7% in the first quarter (Q1), but economists doubt that can be replicated in the current quarter.
Smith said the figure is quite outdated and won’t include the impacts of Trump’s “Liberation Day”.
He believed that since that time, the main source of relief for inflation has been a fall in energy prices, although that is now heading in the other direction.
On the NZX today, Vulcan Steel recorded a lot of movement after it announced on Monday that its chief executive of 19 years, Rhys Jones, was stepping down from the role, with chief commercial officer Gavin Street taking over.
Shares in Vulcan Steel rose 1.81% to $6.20, up 11c, with 1,167,037 shares changing hands to the value of $7,154,822.53.
Elsewhere, Briscoe Group saw its share price rise 23c to $6.23, with 221,384 shares changing hands to the value of $1,345,616.27.
Meanwhile, shares in Fisher & Paykel Healthcare rose 0.55% to $36.85, up 20c with 643,610 shares changing hands to the value of $23,627,612.40.
Ryman Healthcare also rallied late in the day, with its share price rising 4.61% to $2.27 with 1,300,999 shares changing hands.
Wall Street stocks fell on Tuesday local time after Trump hardened his rhetoric on the fighting between Iran and Israel, sparking worries of a broadening conflict.
The Dow Jones Industrial Average finished down 0.7% at 42,215.80.
The broad-based S&P 500 dropped 0.8% to 5982.72, while the tech-rich Nasdaq Composite Index shed 0.9% to 19,521.09.
Anxiety about Iran and Israel has emerged as the market’s focal point at a time when investors are also watching the Federal Reserve, which opened a two-day monetary policy meeting.
Tomorrow, the Fed is also due to release its latest economic projections on growth, unemployment and inflation.
Markets digested weaker than expected US economic data. Overall US retail sales fell in May by 0.9% from April to US$715.4 billion, figures that suggested a pullback from April’s surge in buying to beat out tariffs.
– Additional reporting AFP
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.
