KEY POINTS:
The New Zealand sharemarket's record 14-day losing streak ended yesterday - but only just - after the US Federal Reserve rode to the rescue of fear stricken markets around the world with a swift and deep cut to interest rates.
But the Fed's 75 basis point interest rate
decrease, its largest single cut in 25 years and one made in between scheduled rate decisions, is unlikely to bring a sudden end to the volatility bedevilling equity markets at home and abroad, commentators said.
After steep losses around the world on Monday and Tuesday on growing fears of a US recession that would impact on other economies, the US market was expected to follow suit when it reopened for business on Tuesday after a long weekend.
While US stocks did dip sharply on opening, they recovered when the Fed announced the cut. Nevertheless, the dramatic move was not sufficient to lift Wall St into positive territory, and the Dow Jones Industrial average closed 1.02 per cent lower, the technology sector Nasdaq closed down 2.04 per cent and the broad market S&P 500 ended 1.09 per cent lower.
The New Zealand market, which escaped the worst of Tuesday's sell off, saw its benchmark NZX-50 index rise as much as 1.2 per cent early in yesterday's session but it gave up some of its gains to close narrowly in positive territory, up 8.16 points or 0.23 per cent at 3615.30.
Forsyth Barr dealer Suzanne Kinnaird said there were signs over the last couple of sessions that investors were seeking out good local stocks that had been savaged in the preceding three weeks of indiscriminate selling and they were further encouraged by the Fed's action.
"People are finally thinking there must be a bargain or two to be had.
"The ones I've been pointing clients towards are good quality blue chips, with well established, strong cash flow businesses. Even if you do see them fall again at some point you can still be quite comfortable that they're going to ride out the turmoil."
They included Contact Energy, which rose 7c to $7.20, Fletcher Building which closed flat at $9.95, and retirement home operator Ryman Healthcare which gained 5c to $1.70.
"The number of people that are going to buy rest homes in New Zealand is unlikely to be affected by a US recession," said Kinnaird.
"Even Telecom at current levels is looking reasonably attractive."
First NZ Capital's head of research Barry Lindsay, welcomed the Fed's cut and the local market reaction. However, he said the US market reaction was ambiguous.
"It would suggest that while they're pleased to see that action overnight which led to the Dow Jones picking itself off its lows, the fact that it didn't achieve a net gain over the course of the day is cause for concern. A lot of investors remain unconvinced that this is the right recipe."
Many feel that "today's recovery is no more than a one off. That's the bearish view, I hope that isn't the case."
The Australian market, which was hit hard in Tuesday's sell-off, rebounded strongly yesterday with the ASX-200 rising 6 per cent in the session before closing 4.35 per cent higher.
After US markets closed, bellwether stock and market darling Apple announced first quarter results accompanied by downbeat commentary about its outlook.
"One would have to say that Wall St will have to digest disappointment from Apple when it opens trading and it doesn't set the scene for a great run," said Lindsay.
"That's why I suspect that some of those gains that we've seen today are being eroded as we speak," he said referring to the Australian market.
"I'm not 100 per cent convinced that today's gains are sustainable ... Volatility is going to remain with us."
MARKET WATCH
* The NZX-50's record run of 14 days of consecutive losses ended yesterday after the market clung to a modest gain.
* The improvement in sentiment was driven by a surprise emergency 75 basis point rate cut by the US Federal Reserve on Tuesday, and by local bargain hunters.
* However, local market watchers say markets are not out of the woods yet and expect to see further volatility.
