The New Zealand dollar slumped to its lowest level in six years after billions of dollars were wiped from financial markets in the US, Europe and Asia as fallout from China's "Black Monday" reverberates around the world.
The kiwi touched 62.44 US cents overnight, its lowest level since July 2009, amid low liquidity, and was trading at 64.90 cents at 8am in Wellington, from 65.89 cents at 5pm yesterday.
The trade-weighted index fell to 69.98 from 71.04 yesterday.
Investors sold the kiwi as concerns about a slowdown in China spurred a flight to safe haven assets.
China's benchmark Shanghai Composite Index tanked 8.5 per cent following weak manufacturing data on Friday, and concern about growth in the world's second-largest economy spread to other markets, causing a selloff in European and US equities and pushing down the price of oil and other commodities.
US stocks have closed sharply lower, with the Dow Jones industrial average down more than 588 points and the Standard & Poor's 500 index now down more than 10 percent off its recent high.
The Dow fell 588.47 points, or 3.6 percent, to 15,871.28. The index dropped more than 1,000 points in the opening minutes of trading.
The Standard & Poor's 500 index slid 77.68 points, or 3.9 percent, to 1,893.21.The Nasdaq composite shed 179.79 points, or 3.8 percent, to 4,526.25 points.
The New Zealand market fell 2.49 per cent yesterday, with a similar sized fall expected today.
Though the declines eased significantly as the morning went on, the market plunge sent a shiver of fear through Americans with retirement accounts or saving to buy a home that the bull market is over.
The Standard & Poor's 500 index briefly slid into correction territory after the opening " Wall Street jargon for a drop of 10 percent or more from a recent peak. The last market correction was four years ago. Treasurys surged as investors bought less risky assets.
The Dow fell 1,089 points within the first four minutes of trading as traders dumped shares. But the fire sale was short-lived. A wave buying cut the Dow's losses by half just five minutes later.
NZ market falls 2.49pc
New Zealand and Asian markets are widely expected to follow the Wall St lead and fall today - with Mark Lister, head of private wealth research at New Zealand's Craigs Investment Partners, telling Radio New Zealand this morning he expected a fall of similar magnitude to yesterdays.
Few New Zealand companies on the NZX had direct links to the Chinese economy in the same way as other multinationals such as Apple. On the New Zealand market, higher risk companies - that also offered higher returns - tended to be sold off first in such times.
Lister said safer, blue chip companies such as Auckland International Airport, Contact Energy and property companies tended to do better in such a climate. Longer term investors, such as those with KiwiSaver accounts, could do well out of corrections, as the cheaper shares meant good buying opportunities.
By the close of trading yesterday, New Zealand's S&P NZX 50 was down 143 points, or 2.49 per cent, to 5616, with $2.25 billion shaved off the market's total value. It was the worst day on local markets in four years.
Australia's All Ordinaries Index fared even worse, slumping 3.66 per cent. In China, the Shanghai Composite Index was down 8.4 per cent at 3211 late yesterday.
Four reasons the NZX wasn't hit as hard:
• Much of the weakness overseas is related to oil and resources, which do not feature strongly on the NZX.
• The economy is generally in better shape than many of its peers.
• There are still levers to pull if the economy does worsen from here - such as lower interest rates and a lower exchange rate.
• The company reporting season has seen some solid results, which has helped to offset some of the weakness.
While the New Zealand market was badly shaken, its decline was not as great as other markets experienced because of its high proportion of dividend-paying stocks, according to fund managers.
Among the bigger stocks to lose ground was Fletcher Building, down 30c to $7.23, Chorus, down 12.5c to $2.625, and Auckland International Airport, down 22c at $4.99. Tech stock Xero shed $1.21, or 8.06 per cent, to close at $13.80.
"There is a fair amount of selling out there, but it is very much globally led," said Matt Goodson, managing director at Salt Funds Management.
"There has been aggressive selling around the region and New Zealand is not immune from that, but the nature of our market - lower risk ... - means that we are down but we are certainly not as bad as Australia and the other Asian markets."
"Anybody with a pulse was nervous when the market opened," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, told Reuters. "The only thing that's certain is the volatility is going to continue in the short term, given the magnitude of the moves that we've already had in the last four days."
I think emotions got the best of investors. The conjecture that the Chinese economy can propel the US economy into recession is ridiculous when it's twice the size of the Chinese economy and is consumer based.
"It's a bloodbath," Mark Hanson, an analyst who follows US crude explorers at Morningstar in Chicago, told Bloomberg. "We're at an intersection of a lot of bad news."
A gauge of investors' concerns, the CBOE Volatility Index or VIX, climbed 24.8 percent to 34.97 after rising as high as 53.29 earlier in the session.
"I think emotions got the best of investors," Philip Blancato chief executive at Ladenberg Thalmann Asset Management in New York, told Reuters. "The conjecture that the Chinese economy can propel the US economy into recession is ridiculous when it's twice the size of the Chinese economy and is consumer based."
Slides in shares of DuPont and those of Cisco, down 3.7 percent and 3.6 percent respectively, led the Dow lower. Bucking the trend was Intel; its shares last traded 1.9 percent higher.
Shares of Apple last traded 0.8 percent lower at US$104.96, after the stock had sunk as low as US$92.00 earlier in the session.
Apple's chief executive, Timothy Cook, opted to email Jim Cramer, the television host of CNBC's "Mad Money," with an update on the company's performance in China.
"I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August," Cook said in the email to Cramer. "Obviously I can't predict the future, but our performance so far this quarter is reassuring."
Lister said the New Zealand market was holding up better than others but it was still not a great day.
"I think there is more [weakness] to come and I think there will be more falls in overseas markets overnight."
Lister said much of the weakness overseas was related to oil and resources, which do not feature strongly on the NZX, and that the New Zealand economy was generally in better shape than many of itspeers.
In Australia, losses are being felt across all market sectors, with the banking, mining and energy giants among the worst affected.
Renewed fears about China's slowing economy are the main factor, after manufacturing activity in the world's second-largest economy this month slumped to a six-and-a-half-year low.
Volatility on Chinese sharemarkets, recent moves by China to devalue its currency, plunging oil prices and uncertainty about when United States interest rates will be lifted are also combining to spark the global share sell-off.
- with AP/ BusinessDesk