Wary Kiwi traders offer polite applause to Wall Street surge

By Adam Bennett

An almost 11 per cent gain on Wall St was welcomed by investors on the New Zealand sharemarket yesterday, but with caution.

The US benchmark Dow Jones industrial average soared 889.4 points or 10.9 per cent in one of its largest ever one-day gains.

However, in the present environment where dizzying surges have often been bookended by vertiginous plunges, investors on the New Zealand market were restrained in their buying when the NZX opened for business yesterday and even those early gains were tempered by the end of the session.

Having surged by more than 4 per cent at one point, the NZX-50 closed 58.5 points or 2.18 per cent higher at 2745.60, failing to recover all of the previous session's 3.3 per cent loss.

Healthy gains by blue chips like Fletcher Building - up 8c at $5.61 and Contact Energy - up 51c at $7.15 were were offset by Telecom's 6c fall to $2.21, its lowest close since it floated at $3 in 1991.

Other markets in the region also gained. Australia's ASX-200 edged up 1.34 per cent and Japan's Nikkei closed up 7.7 per cent. But Hong Kong's Hang Seng was down slightly.

New Zealand investors were justifiably wary said Shane Solly of Mint Asset Management.

"Things are not as bad as they were, we've averted a disaster, but there's still a few problems to be revealed."

Solly expected offshore and domestic markets to remain "whippy" for some months to come.

Grant Williamson of Hamilton Hindin Greene said the market's early gains yesterday were reined in by profit-taking by short-term traders.

Longer-term investors remained cautious.

"They see a big day up offshore but they're not too keen to get in to buy up too much because over the last few weeks the next day we've got Wall St down 200, 300, or 400 points. Investors are cautious."

Meanwhile, it was another volatile but overall positive session for the kiwi on the foreign exchange market.

From a US56.14c around 8am the kiwi dollar rose as high as US57.98c before settling at US57.08c at 5pm.

BNZ currency strategist Danica Hampton said the currency barely blinked at trade data today. Its leap from lows was simply a reflection of a leap in global equity markets.

After shedding US8c in a week before last night, the kiwi was looking to consolidate and overnight made steady gains up from US54.26c to US55.71c before a bounce kicked in about 7am.

"Given that it has come so far so fast a bounce wasn't out of the question," Hampton said.

"Worries about a global recession will continue to plague the markets."

AROUND THE WORLD

* New Zealand: NZX-50 up 2.18 per cent at 2745.60
* Australia: ASX-200 up 1.34 per cent to 3845.6.
* Japan: Nikkei up 7.7 per cent to 8211.9
* Hong Kong: Hang Seng down 0.2 per cent to 12,593.56.
* US: Dow Jones up 10.9 per cent to 9065.12 (overnight Tuesday).
* Britain: FTSE-100 up 1.92 per cent at 3,926.38 (overnight Tuesday).

- additional reporting agencies

- NZ Herald

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