KEY POINTS:
Sharemarkets around the globe are feeling the ripple effect of a huge fall on Wall Street earlier today (NZ time).
The New Zealand sharemarket slumped 1.3 per cent in early trading, after the US stockmarket plunged nearly 3 per cent on further worries about the risky US subprime mortgage market.
In Sydney, the Australian sharemarket shed nearly three per cent on opening.
The Australian Securities Exchange main gauge, the S&P ASX 200 Index, dropped more than 170 points to a low of 5994.4, and was down 2.5 per cent to 6009.1 in the first twenty minutes of the morning's trading.
Japan's Nikkei share average sank more than 2 percent on opening, as Mizuho Financial Group and other financial stocks were hit by desperate "sell" orders.
The Nikkei lost 376.68 points or 2.19 percent to 16,793.92.
In a dramatic 12 hours until 10am (NZT) this morning:
* One of Europe's largest banks, BNP Paribas, froze withdrawals from three big funds, citing US subprime mortgage market problems;
* In response, the European Central Bank pumped a record 94.8 billion euros into Europe's money markets as banks scrambled for cash;
* US President George W Bush sought to calm fears of a major recession, telling a news conference that both the global and US economy were strong;
* The Bank of Canada said it was in constant contact with other central banks on the global situation and stood ready to add money as needed; and
* Wall St had its worst day in a year, finishing the session with almost three per cent of share value wiped off the board.
Here in New Zealand, the NZSX-50 index, which jumped over 1 per cent yesterday, dropped 53.13 points to 4107.3 by 10.05am.
There were no stocks up in the top 50. Contact Energy dropped 19c to 925 and Westpac Bank dropped 74c to 2900.
ASB Securities' broker Stephen Wright said: "We are seeing falls across the board.
"It was expected. It's just a simple reaction. I don't where exactly it's going to finish, it could even get worse."
Market leader Telecom was down 3c to 431 in a relatively strong performance but second ranked Fletcher Building was down 21c to 1226.
Other big falls included Trustpower 15c to 820, Infratil 10c to 294, Sky TV 16c to 549 and Tower 9c to 217.
Ten minutes after the market had opened, the top 50 index had extended its loss - down 60 points to 4100, or 1.5 per cent.
US stocks tumbled overnight with the Dow and S&P down nearly 3 per cent, after a French bank froze three funds that invested in US subprime mortgages, prompting central banks to take steps to calm investors.
Evidence the US mortgage market crisis was having a global impact and spreading to other markets hammered financial stocks.
Goldman Sachs Group dropped nearly 6 per cent after the Wall Street Journal reported a second fund managed by the investment bank was under pressure to sell assets after falling in value. The S&P financial index fell 3.8 per cent and the sector was one of the biggest drags on the S&P 500.
Currency markets were also affected with the New Zealand dollar also falling heavily.
The kiwi slid to a seven-week low against the greenback as it lost US1-1/2c overnight to US75c.
The kiwi dollar is seen as vulnerable to volatility in financial markets as much of its rise this year is based on speculative investment in the so-called carry-trade -- where investors borrow in low interest Japan and invest in high interest regions like New Zealand.
With the European Central Bank and the US Federal Reserve forced to inject liquidity into the system to avoid a credit crunch, investors would need to reassess risk pricing once again, analysts said.
"The Fed has said the subprime issue is contained," said Hugh Moore, partner with research-based advisory firm Guerite Advisors in Greenville, South Carolina, referring to the Federal Reserve. "It's spread not just outside the industry, but outside the US That really has people spooked."
The Dow Jones industrial average sank 387.18 points, or 2.83 per cent, to close on 13,270.68. The Standard & Poor's 500 Index slid 44.40 points, or 2.96 per cent, to 1453.09. It was the worst percentage drop for both indexes since the February 27 sell-off.
The Nasdaq Composite Index fell 56.49 points, or 2.16 per cent, to 2556.49.
The European Central Bank injected a record US$130 billion ($175 billion) into the banking system to help calm jittery markets after BNP Paribas barred investors from redeeming 1.6 billion euros ($2.96) billion) worth of funds, blaming the conditions in the subprime mortgage market.
US President George W Bush said advisers told him there is enough liquidity in the system to let markets make necessary adjustments. The Bank of Canada also said it injected a larger-than-normal amount of funds to support the stability of the Canadian financial system.
Trading was extremely volatile, with the Nasdaq briefly turning positive. All three indexes added sharply to their losses in the last few minutes of trading.
