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Swine Flu Is An Uncertainty For Markets

Fuseworks Media
Fuseworks Media

Wellington, April 27 NZPA - The spread of swine flu introduced an uncertainty to New Zealand financial markets today ahead of the United States market opening.

The New Zealand and Australian dollars were weaker today, which some commentators attributed to worries about the spread of swine flu, which has killed more than 100 people in Mexico.

ANZ said the winners from the uncertainty were US bonds, gold and the US dollar, which benefited from safe haven flows.

"US futures point to a potential triple digit decline in the Dow Jones Industrial Average," ANZ said.

The New Zealand share market closed up 7.987 points today at 2664.372 but tourism stocks were weaker and makers of pork substitutes were stronger as investors tried to assess the winners and losers from the emerging situation.

The New Zealand dollar was at US56.43c at 5pm, down from US57.21c at 8am, but up from US56.20c at 5pm on Friday. The trade weighted index rose to 56.12 from 55.93 on Friday.

BNZ Capital currency strategist Danica Hampton said swine flu was an issue at the margins in the foreign exchange market.

"People know about it. People are talking about it but it is not really the big driver of the currency.

"What we have seen today is a reversal of the squeeze we saw on Friday night," she said.

But ANZ said expect markets to trade off swine flu developments, with risk aversion set to rise if further cases are detected.

Governments appeared to be taking all the right steps.

"But at a time when the global economy is still fragile, and sentiment in markets very flaky, this latest swine flu development is the last thing we need right now," ANZ said.

There was a danger that trade barriers will be put up in response to the health crisis.

The New Zealand market also has to digest a rate cut decision from the Reserve Bank of New Zealand on Thursday and the National Bank of New Zealand business outlook survey on Wednesday is also often a market mover.

The central bank is expected to cut rates by 50 basis points to 2.5 percent.

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