NZ market lower on China's tighter monetary policy

Equity markets around the world, including the New Zealand sharemarket, fell today after China said it would raise banks' reserve requirements, a move that could dampen a nascent recovery from the worst global recession in decades.

The sudden central bank move came earlier than investors had expected and appeared prompted by concerns that a renewed surge in bank lending was flooding the Chinese economy with too much cash, risking overheating and a surge in inflation.

The benchmark NZSX-50 index closed down 14.096 points, or 0.428 per cent at, 3276.195. A new year rally to a 15-month high had already begun to peter out yesterday when the market fell 13.5 points. Today's turnover was worth $61.58 million. There were 36 rises and 47 falls among the 114 stocks traded.

Miners were under pressure in many markets as China has been a big customer for the sector. But there was also positive news on the commodity front in the form of a strong commodity price index report from ANZ here today. Pike River rose a cent to 98, while NZOG eased 2c to 163.

"A few weeks ago there was a rotation to riskier assets. Now we're beginning to see that unwind with money looking for more defensively positioned sectors," IG Markets said in a commentary.

"Anything from stocks to currencies exposed to China are being sold. There has been talk around for sometime that the Chinese would look to slow their economic expansion but the market wasn't expecting the measures so soon."

Air NZ eased a cent to 117 after saying it is boosting the number of flights between Queenstown and Australia for the coming ski season.

Auckland Airport eased a cent to 195 after settling the purchase of a stake in north Queensland airports.

Telecom eased 2c to 252 as media reports continued to cover its latest violation of fair trading law.

Fletcher Building, a strong performer so far this year, eased 2c to 845.

Contact Energy was unchanged at 632 and TrustPower eased 2c to 728. Vector eased a cent to 200.

Shares in Bay of Plenty electricity distributor Horizon Energy soared 85c, or 27.87 per cent, to 390 after the Eastern Bay Energy Trust, which already owns 77.3 per cent of Horizon, said it wanted to buy the rest of the Horizon shares at $4.

SkyCity fell 6c to 333, Nuplex 4c to 305, and NZ Farming Systems Uruguay 1c to 47.

Fisher & Paykel Appliances, expanding in China with the help of Haier, was unchanged at 63.

Restaurant Brands rose 1c to 175 and Port of Tauranga rose 5c to 715. Steel & Tube rose 1c to 296.

US stocks slid in a broad selloff on Tuesday as investors pummelled financial stocks on concerns about a potential government levy on banks, while Alcoa Inc's disappointing results tempered optimism about the economic recovery.

The benchmark S&P 500 broke a six-day streak of gains as banks led the financial sector lower, sending the KBW bank index down almost 2 per cent.

United States president Barack Obama is considering a levy on financial services firms to recoup losses from the Troubled Asset Relief Programme as part of the fiscal 2011 budget, according to a senior US official.

"Talk of a levy creates even more uncertainty for the market and that's the reason for the financial to pull back" said Quincy Krosby, market strategist with Prudential Financial in Newark, New Jersey.

The Dow Jones industrial average dropped 36.73 points, or 0.34 per cent, to 10,627.26. The Standard & Poor's 500 Index fell 10.76 points, or 0.94 per cent, to 1136.22. The Nasdaq Composite Index slid 30.10 points, or 1.30 per cent, to 2282.31.

- NZPA