KEY POINTS:
The New Zealand sharemarket reached a new two-year low yesterday as investors sat on the sidelines awaiting some sign of a recovery.
Falls on Wall St overnight pushed the local market down 10 points to 3394 in early trading after it hit a 27-month low of 3377.47 on
Tuesday.
By 3pm, the NZX had plumbed a fresh low of 3374.34, but recovered to close at 3391.62, down 12.94 points or 0.38 per cent.
It marked the sixth consecutive fall in as many trading days, coming on the back of strife at listed Dominion Finance, a fall in US financial shares, and a lack of significant market announcements locally.
It also came as Finance Minister Michael Cullen told Parliament's finance and expenditure select committee in Wellington that the first quarter GDP figure - released on June 27 - "almost seems inevitably to be negative".
ASB Securities' Stephen Wright said apart from Dominion Finance, the same factors were at play - worries about the economy, the state of world markets and the price of oil.
Volumes were low as investors waited it out. "There's not a vast amount of selling out there, just a general drift on no positive sentiment."
Wright said a turnaround was unlikely unless corporate activity picked up because share prices got so low that companies became attractive takeover prospects - in spite of the credit crunch.
"The prospect of a takeover's certainly tougher but they're happening again in Australia and the US."
Hamilton Hindin Greene adviser James Smalley said the sentiment was generally negative across the board but on fairly light volumes.
"It probably indicates that most buyers are more than content to just sit on the sidelines at the moment and perhaps looking to get back in if there's a sign of a definite bounce, which we haven't seen for the last few days."
Smalley said interest-rate cuts from the Reserve Bank could see some buyers return to the market, as value from income started to come back into the mix.
On the oil market, prices fell for a fourth day yesterday as more investors appeared convinced that top exporter Saudi Arabia's plan to boost supply could tame prices.
US crude futures for July fell 66c to US$133.35 ($176.58) a barrel, taking four-day losses to over US$3.30 a barrel or 2.4 per cent. The contract briefly hit a record of nearly US$140 on Monday.
