MARKET CLOSE: Shares rebound but Xero hits 16-month low

New Zealand shares rebounded from last week's drop, led by SkyCity Entertainment Group and Meridian Energy, as investors hunted reliable income in a volatile market. Xero extended its decline, dropping to a 16 month low.

The NZX 50 Index rose 50.944 points, or 1 percent, to 5197.886. Within the index, 36 stocks rose, 11 fell and three were unchanged. Turnover was $111 million.

The local bourse followed Wall Street's Friday recovery, after a period of volatility which saw the CBOE VIX Index, also known as the fear gauge, spike to its highest level since 2012 last week. Investors were spooked by weak economic data out of Europe, adding to fear of stalling global economic growth, along with geo-political instability in West Africa and easterb Ukraine.

"We had a fairly volatile period of time there," said James Lindsay, senior portfolio manager at Nikko Asset Management. "The things on people's mind will be the spread of Ebola, that has worried the market. You've seen the Russia and Ukraine negotiations fail over the last week, and the chasm between the two powers seems to be widening. Eurozone data paints a sick picture and a few people will worry about what will happen there."

SkyCity, the casino operator which offers a forward dividend yield of 5.5 percent, advanced 5.9 percent to a five-week high of $3.78 after it said last Friday that first quarter revenues were showing good momentum, up 6 percent on the first quarter of the previous financial year.

Power companies, held for their stable income and high dividend yields, jumped. State-controlled power retailer and generator Meridian climbed 5.1 percent to $1.645. Fellow partially privatised power businesses MightyRiverPower and Genesis rose 4.5 percent to $2.78, and 1.6 percent to $1.97 respectively. Contact Energy increased 1.4 percent to $5.98. TrustPower rose 0.8 percent to $7.21. Infratil, which owns a majority shareholding in TrustPower, gained 0.7 percent to $2.84.

Xero [NZX:XRO], the cloud-based accounting firm, was the worst performer on the benchmark index, dropping 5.9 percent to $16.05, its lowest since August last year. The stock has dropped 25 percent in the past month, as investors question the Wellington-based company's pace of growth in the US, where it is competing against incumbent Intuit. Xero wants a million customers worldwide, and is targeting growth in the US market where so  far it has some 22,000 of its total 371,000 customers.

"They haven't been hitting their stride in the US and a lot of peoples' view of its value is based on it beating Intuit," Lindsay said. Despite the stock's fall, it would still look expensive to many brokers, he said.

Fletcher Building, the country's largest listed company, advanced 2.1 percent to $8.66. Spark New Zealand, formerly Telecom Corp, gained 0.5 percent to $2.90.

Summerset Group Holdings, New Zealand's third-largest listed retirement village operator, gained 1.5 percent to $2.67 after it said the first 14 homes in its $55 million New Plymouth retirement village will be completed next month, with residents expected to move in before Christmas.

Steel & Tube Holdings, the steel products manufacturer, rose 1.4 percent to $ 2.67. It is defending a $1.75 million claim, lodged in the High Court today, over a disputed lease contract, denying any legal responsibility for losses relating to its former subsidiary Stube Industries, which was liquidated last year, and Lewis Holdings.

Units in Fonterra Shareholders' Fund fell 0.3 percent to $6.20.  Fonterra Cooperative Group, the world's biggest dairy exporter, will appoint Nicola Shadbolt to sit on the board of the fund manager to replace the retiring Jim van der Poel at next month's annual meeting. Units of the fund give holders access to Fonterra's dividend stream.

On the NZ Alternative Index, BurgerFuel Worldwide  rose 1.8 percent to $2.90 after the fast food chain franchisor said it is opening five new Australian stores and will announce the timing of its US expansion soon.