The New Zealand sharemarket briefly dipped into correction territory by dropping 10 per cent from its record high, a little over a week ago, before partially rebounding.
Today's decline puts the local market in the same boat as the US stock market, which last week dropped by just over 10 per cent on concerns about the coronavirus outbreak.
The local market's weakness is against the background of an extraordinarily strong year for the NZX in 2019, when the benchmark index gained 30 per cent as investors sought out New Zealand's high proportion of dividend-paying stocks in response to very low interest rates here and around the world.
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Data over the weekend showing the Chinese economy was rapidly slowing acted to undermine markets, as did another weak close on Wall Street on Friday.
China's manufacturing purchasing managers' index, one of the first official economic indicators published since the coronavirus outbreak, fell to 35.7 in February, a record low, and down from 50 in January.
The S&P/NZX50 index closed at 11,013 points, down 1.4 per cent on Friday's close, back to where it was last November, and down 8 per cent from its record high on February 21 of 12,073.
At today's session low of 10,860, the index was off by just over 10 per cent from its all time high.
The market's 2019 firming trend spilled over into 2020, taking its total market capitalisation to $170.5 billion at its peak.
The coronavirus Covid-19 has turned up in 67 countries and territories around the world and one ship, the Diamond Princess, in Japan.
Mark Lister, head of private wealth research at Craigs Investment Partners, said the data out of China was a symptom rather than a cause of the markets' decline.
He said markets were reacting more to the spread of the disease around the world rather than in China, where the rate of infection appears to be declining.
South Korea, Italy and Iran have emerged as the main trouble spots for the virus outside the PRC.
"When the news keeps coming through thick and fast of it spreading, people are going to shoot first and ask questions later," Lister said.
"They will take risk off the table," he said. "I think we are in for a rough week."
The New Zealand dollar traded at its lowest point since August, 2015, as markets started to factor in more rate cuts from the Reserve Bank, hitting US61.8c, its lowest point since August 2015, and more than US4c lower since late January.
Bank of NZ senior markets strategist Jason Wong said the weekend's manufacturing data from China should not have come as a big surprise.
"The China data shocked some people, but when the economy had shut down, I'm not sure what people expected," he said.
"Travel bans, people panicking in supermarkets, cancellation of sporting events and concerts, and factories shutting down, is what you get in a recession, and I guess that's what the market is factoring in."
"The longer this continues, the longer the recession will be, and the New Zealand dollar does not fare well in global recessions."
Finance Minister Grant Robertson, speaking on TVNZ's Q&A programme on Sunday, said he does not expect New Zealand to fall into recession.
"The information that we have today is that there won't be one, that's the advice that we are getting," he said.
"We'll have very low, if any, growth, in the first quarter, in the second quarter, perhaps some growth."
Across the Tasman, the S&P/ASX200 sharemarket index was down by 2 per cent.
Australian financial markets are fully pricing in a quarter of a point cut the official cash rate at tomorrow's Reserve Bank of Australia review.
In global commodities markets, oil prices have slumped by about 28 per cent since early January.
Benchmark West Texas intermediate last traded at US$45.30 a barrel, its lowest since December 2018 - and down from US$62.7 on January 7.