KEY POINTS:
The bloodshed continued on the sharemarket yesterday after a one-day hiatus as the NZX followed Wall St's lead.
The Dow Jones industrial average plunged to a three-year low overnight on Wednesday, sending tremors through world markets.
New Zealand shares closed down 3.5 per cent, or 111 points, at
3158.92, wiping about $1.3 billion off the market. Telecom lost 8c to $2.73, Fletcher Building fell 32c to $6.95, while Contact Energy shed 15c to $8.61.
Leo Krippner, head of investment strategy at AMP Capital Investors, said sentiment around Wall St was certainly behind the sharemarket's performance yesterday, but more fallout was far from a certainty.
"There's already quite a lot of negative sentiment built in. And it would certainly be easy to get carried away with the negative sentiment that we've seen so far and start thinking that things are just going to keep on spiralling out of control.
"We've long thought that the central banks around the world have been doing a reasonable job trying to keep things contained, so we've still got faith that the central banks are likely to come to some sort of arrangement where they can actually start to forestall the volatility that's going on, and help things settle down.
"That may take a few days but I don't think people should automatically extend the last couple of negative days that we've had to something that's going to keep on occurring unchecked because there will be some natural stops to that at some stage."
Krippner said incoming tax cuts and a falling official cash rate might help investor confidence.
"The New Zealand economy is coming from a position that I think is a lot stronger than some of the other major global economies. We have got lots of room to lower interest rates, if that's required. We have got an exchange rate that's still a little bit overvalued and so has got room to fall if that's required to help things up."
ASB Securities' Stephen Wright noted that the share price falls, while severe, remained on relatively light turnover. There was no way to tell if the fallout had ended, he said.
"It just seems ongoing. And some people say they'll cut interest rates more, but that hasn't helped much, and never helped in Japan when that was going down years ago. Everybody's just nervous."
Skittishness saw the Nikkei, Hang Seng and ASX-200 all open between 3 and 4 per cent lower. The Nikkei closed down 260.49 points, or 2.2 per cent, at 11,489.30, its lowest close since June 2005. The Australian stock market closed down 114.9 points, or 2.4 per cent, at 4607.3.
However, shares in Australia's gold miners closed sharply higher after the price of the precious metal posted its biggest one-day gain in nine years. Gold put on US$70 ($107) an ounce, or 9 per cent, to US$850.50.
AROUND THE WORLD
* New Zealand: NZX-50 down 3.5% to 3158.92.
* Australia: ASX-200 down 2.4% to 4607.3.
* Japan: Nikkei down 2.2% at 11,489.30.
* England: FTSE 100 down 2.3% at 4912.4 overnight Wednesday.
* US: Dow Jones down 4.1%, to 10,609.66. The Standard & Poor's 500 fell 4.71%, to 1156.39.
- AGENCIES