Conversely, Asian markets were notably stronger. Hong Kong's Hang Seng was up 0.9 per cent, the Shanghai Composite Index rose 2.9 per cent and Japan's Nikkei was up 1.3 per cent. On Wall Street on Friday, the S&P 500 index was down 0.8 per cent and the Dow Jones Industrial Average declined 1.4 per cent.
McCarthy said markets rarely move in a straight line and this did not mean the trend had reversed.
"Given the market was absolutely trounced last week, we would be expecting said bounce back at some stage. That doesn't mean we have an all-clear by any stretch of the imagination."
Tomorrow, the Reserve Bank of Australia is expected to announce a cut to interest rates and economists are expecting New Zealand's Reserve Bank to follow suit at its next meeting later this month. However, McCarthy remained reserved about the effectiveness of cutting rates which are already at historic lows.
"Privately I'm sure central banks have doubts about the effectiveness of cutting rates another quarter or half a per cent. The signal it sends – that central banks are supporting markets – might be more important than the actual effect," he said.
Air New Zealand led the local market lower, dropping 7.9 per cent to $2.09 on a volume six times its 90-day average. The company recently reported that international passenger numbers had been hit by coronavirus and today offered a thousand domestic airfares at just $9 as part of an effort to boost domestic travel.
Auckland International Airport declined 3.6 per cent to $7.59 and Tourism Holdings fell 3.6 per cent to $2.4. The government today extended travel restrictions would be extended for another week and added that travellers from northern Italy and South Korea would be required to self-isolate for 14 days.
McCarthy said the high volumes showed there was a lot of conviction behind investors concerns.
Provisional data released by Stats NZ showed exports to China may be 19 per cent lower than they would have been without covid-19.
Exporters were hit hard in the sell off, Synlait Milk fell 6.8 per cent to $5.60, Scales Corporation fell 5.3 per cent to $4.10, Skellerup Holdings fell 3 per cent to $1.93 and the Port of Tauranga declined 4 per cent to $6.28.
The Ports of Auckland said it won't pay a first-half dividend to the city partly due to coronavirus outbreak weighing on transport movements. Port of Tauranga trimmed its annual earnings guidance last week, with the logging sector hit the hardest. Auckland differs in that it's primarily an import hub.
Investors were not just selling down companies with exposure to China. Ryman Healthcare fell 1.3 per cent at $15.06, while Mercury NZ was down 3.9 per cent at $4.60.
A few stocks found support against the market, Ebos Group – which reported a strong first half result last week – increased 2.8 per cent to $23.93, Spark New Zealand gained 2.3 per cent to $4.64 and Chorus rose 0.8 per cent to $6.73.
CMC's McCarthy said this looked like some investors bargain hunting during the dip and anticipating the recovery.
"Markets are very fragile and predicting the next 24 hours is a difficult exercise. But according to market theory, five or six down days in a row is a pretty hard sell-off and regardless of the news flow I would expect to see some bounce back from that at some stage this week," he said.
