KEY POINTS:
Fears the New Zealand sharemarket was in freefall were alleviated today after a strong showing on Wall Street overnight.
The local market fell for the sixth consecutive session yesterday, pushing the benchmark index to a 14-month low. The index has dropped over 5 per cent this year, wiping over $3.3 billion off the value of equity investments.
Analysts fear fallout from the international credit crisis will push the US economy into recession and stymie growth in China and the rest of Asia as well as Europe.
The NZSX-50 index fell 1.2 per cent or 47.97 points to 3824.20 yesterday, the lowest point since November 2006.
UBS managing director Campbell Stuart said retail and institutional investors were standing off from buying "and things are just drifting into a hole".
However, Wall Street, buoyed by a better than expected quarterly result from blue chip IBM, put in an encouraging performance last night.
The surprise report ahead of International Business Machines Corp's scheduled earnings release on Thursday eased some investor concerns over how much the slowing US economy will cut into technology profits and boosted IBM's shares by 5.7 per cent.
The encouraging earnings assessment struck a positive note in a week of crucial earnings reports that will include major banks battered by subprime losses, including Citigroup Inc and Merrill Lynch & Co Inc.
"The earnings picture provided by IBM is very positive," said Sam Rahman, portfolio manager at Baring Asset Management Inc.
But while this may remove some of the concerns about the sector, "it's just one company and there are a lot more earnings to come," he said.
The Dow Jones industrial average lifted 130.55 points, or 1.04 per cent, to 12,736.85. The broader Standard & Poor's 500 Index rose a more modest 8.70 points, or 0.62 per cent, to 1409.72 while the technology heavy Nasdaq Composite Index rose 24.40 points, 1 per cent, to 2464.34.
Adding to the market optimism, broking heavyweight Credit Suisse raised US stocks to "overweight" for the first time this decade, saying the United States has historically outperformed when leading economic indicators fall "because the speed of macro and corporate policy response is best there".
But concern remains about financial stocks. CNBC reported Citigroup could take write-downs as high as US$24 billion ($31 billion). Citigroup and Merrill have been mentioned in news reports as seeking more cash from sovereign funds and other wealthy investors as they face heavy losses.
Two of the largest banks in the eastern United States, M&T Bank Corp and Sovereign Bancorp Inc, said turmoil in credit, mortgage and real estate markets hurt fourth-quarter results.
One stock investors will be watching today is Sky City, which fell 11c yesterday to $4.09, its lowest level since May 2003.
Adding to local gloom, inflation data out tomorrow is likely to show consumer prices rose 1 per cent in the last quarter last year, lifting the annual inflation rate to the top of the Reserve Bank's 1 to 3 per cent target band.
- NZPA