The New Zealand stock market has bounced back into positive territory this afternoon after a rocky start this morning following one of the worst days in its history yesterday.

The benchmark NZX-50 index was up 0.65 per cent to 8778 points just after 1pm after initially falling 1 per cent this morning in light trade.

The index dropped by 3.64 per cent yesterday.

Overnight, Wall Street's Dow Jones Industrial index dropped 545 points.

The US index has lost 1300 or so points over the last two days, based on concerns about higher interest rates, a forecast of lower world growth, and increasing trade frictions.

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The Australian benchmark ASX-200 is down 0.3 per cent to 5866.3 points in early trading.

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This morning, Shane Solly, a portfolio manager at Harbour Asset Management, said it was reasonable to expect that New Zealand would see a bit more of this choppiness.

"We are going to see another day of softness in New Zealand," he predicted.

But Solly said he didn't believe it would be as bad as yesterday's drop which hovered around 2.5 per cent before dropping another 1 per cent in the last hour of trading.

The S&P/NZX50 has now fallen 6.7 per cent since the end of September but is still in the positive for this year - up 3.85 per cent since the last day of trading in 2017.

Solly said people needed to be aware that New Zealand had been one of the stand-out markets of the lot and that had attracted a lot of new capital from overseas.

The flows of new capital may stop for a while and some existing investments may be pulled out as capital looks to go elsewhere, he said.

While the market falls would be felt in people's KiwiSaver balances Solly said it was only a problem if someone was about to retire or was already retired and they sold up and crystallised the falls.

The fall in the US markets has been caused by rising bond yields and concerns about the trade war between the US and China.

But Solly said some balancing factors were starting to kick in that was easing the pressure in some parts.

He said the US 10-year bond yield had fallen to 3.14 per cent coming off a recent peak of 3.26 per cent.

"That has potentially taken a bit of pressure off."

While the price of oil had also dropped from US$76.40 on October 3 to US$71 which would help ease inflation pressure.

Solly said people had got too used to low levels of volatility but rises and falls of 1 per cent to 2 per cent within a day were a return to more normal levels.

"This surprise jump has been a bit of a surprise for people."

Solly said it was mainly private individuals selling as well as algorithm driven exchange traded funds which had to follow wherever the market went.

"When the market turns down they sell."

The market falls come at a time when there is not much corporate news and in the school holidays when there was often lower levels of trading.

"The school holidays create a vacuum. The robots are selling into nobody."

- Additional reporting by Jamie Gray