Signs of a rebound on the sharemarket were quickly snuffed out today after a strong start to the session was undermined by declines in major markets in the Pacific region.

The NZX-50 index was at one point up by 1.5 per cent in what looked to be a partial recovery from last Thursday's 3.6 per cent drop, but the gain was given up when the ASX and the Japanese share markets opened for business.

By the close the index was at 8838, down 5.17 points, following on from a moderate rebound on Friday.

Fund managers expect trading to remain volatile in the days ahead as the market struggles with the prospect of higher oil prices, rising interest rates in the United States and a more subdued outlook for global economic growth.


In the United States, much is riding on the latest third-quarter earnings reports from the market's top corporates, due out over the next few weeks.

"We opened with a hiss and a roar following on from the rebound on Friday," Mark Lister, head of private wealth research at Craigs Investment Partners said.

"As soon as the other large markets around the world opened - Australia and Japan - the market really came off the boil," he said.

"I think we are just going to have to wait for those markets to see how they go."

Salt Funds managing director Matt Goodson said it had been an encouraging performance early in the session, albeit on light volume.

"There is some concern about Saudi Arabia, and just what has happened to this journalist, and how it may affect US-Saudi relations and oil prices," he said.

Oil prices have already risen on the back of a threat from Saudi Arabia that it would use its economic firepower if targeted by US sanctions over the disappearance of journalist Jamal Khashoggi.

Goodson said it was still a jittery time for financial markets, but much would be taken from the upcoming company reporting season in the US.


"It's certainly too early to suggest that our market is out of the woods," he said.

The sharemarket hit its highest point ever 9375.9 on the NZX-50 last month, causing concern in the among fund managers that valuations were getting too high relative to company earnings.

"Our market was coming at it from of high valuation extremes which have rarely been seen in its history," Goodson said.

There was extreme volatility in some individual stocks with alternative milk company a2 Milk at one out trading at $10.42 before before falling to $9.58 just hours later.

A2 Milk finished a the day at $9.71 - down 18c.

Last week, European bourses finished in the red, but US equities ended with a 1.1 per cent gain on Friday, having lost 1300 points over the previous two trading days.

Sentiment on world markets looked shaky after the International Monetary Fund last week revised down its forecasts for most countries for this year and next, and US 10-year bond yields surged to over 3.20 per cent.

Rising trade tensions and the increased levels of trade protectionism have also served to undermine sentiment.