Investors get bad case of the jitters

Global sharemarkets slid yesterday as economic data out of the United States and China gave investors the jitters.

The NZX-50 fell fell 1 per cent to 3006.91 and the kiwi reached a three-week low against the US dollar, before closing at US71.27c.

Across the Tasman, the ASX200 closed down 1.2 per cent. In, Asia Japan's Nikkei 225 stock average was off 0.9 per cent, after hitting its lowest levels of the year, and Hong Kong's Hang Seng was down 1.4 per cent during trading last night.

Craigs Investment Partners client adviser Belinda Stanley said there was some uncertainty about the economic recovery that had come through from US data and a slowdown in economic activity in China.

"Along with a lot of the [company] results that are coming through at the moment," Stanley added.

"I think the feedback that we're getting from management is that the outlook is a little uncertain."

The Federal Reserve this week said that the US recovery was slowing and needed fresh stimulus, while industrial output in China rose by the least amount in 11 months.

It was a volatile world with two schools of thought as to whether there would be a double dip recession or a slower economic recovery, Stanley said.

"It can all swing around and go the other way in a few day's time, it's still fairly fickle."

There was probably quite a weight of money waiting to be invested, she said.

"The [trading] volumes have been relatively low, people are sitting on the sidelines and maybe if we do see a reasonable fall or correction in the markets we might see more people happy to start re-investing again."

The US Dow Jones industrial average closed down 2.5 per cent, while Germany's DAX and the French CAC40 fell by more than 2 per cent.

Last night, Britain's FTSE 100 was up 0.3 per cent in early trading, having dropped 2.4 per cent in the previous session.

On the New Zealand sharemarket, Telecom shares closed down 1.5 per cent at $2.01, Fletcher Building dropped 1.3 per cent to $7.47 and Contact Energy closed up 0.2 per cent at $5.70.

Hamilton Hindin Greene director Grant Williamson said anything negative out of China seemed to somewhat panic American investors.

"To my mind it's a bit of an over-reaction because China is still growing extremely well," Williamson said.

"The Government over there from my understanding is just trying to slow things down a little bit to stop a bubble, particularly in the house or property pricing."

China was slowly changing from a mainly export-led economy to more of a domestic consumption model and should be able to maintain growth rates that virtually any other country would love, he said.

"I think we saw that in some figures that came out showing some rather large US export growth back into the Chinese market, which I think should be viewed as quite positive."

Sharemarkets had maybe got a little bit ahead of themselves with a pretty good rally, he said.

"Over the last few months it certainly has faltered somewhat and I think reality may be coming back into these markets."

There had been talk of a double dip for quite a few months, Williamson said.

"I'm not convinced that is actually happening at the moment," he said. "We're just having a bit of a correction after a reasonable period on the upside."

It was a mixed bag in New Zealand with positives in some sectors but probably more on the negative side at the moment, he said.

The financial reporting season had just started.

"Although it [would] be extremely difficult to grow revenue in the current economic conditions, I believe a lot of our companies have cut a lot of costs out of their businesses in the past couple of years and that should hold them in pretty good stead," he said.

"A lot of them of course have improved their balance sheets considerably which makes for pretty good prospects going forward in the next few years."

However, Williamson said investors won't see too many companies come out with super-bullish prospects over the next 12 months.

AROUND THE WORLD
* NZX-50......-1 per cent
* ASX200......-1.2 per cent
* Nikkei......-0.9 per cent
* Dow Jones......-2.5 per cent
* FTSE 100......+0.3 per cent (early trading)

- Additional reporting: agencies