The global malaise continues to hurt sharemarkets with the NZX yesterday catching the cold started in the United States and which spread into Australia and Asia as the day progressed.
The NZX-50 fell below 2500 for the first time since March 2004, albeit on fairly light trading, to close down 51 points at 2487. Ninety-day bank bills continued to fall, down 0.02% to 3.27% and the dollar lost US0.3c to US51.04.
Forsyth Barr broker Peter Young said the market was following the "same old lines" from the US.
"It is tough conditions out there. I thought the market was stabilising around 40 points down but it just kept ticking down.
"The real bottom feeders are not coming into the market. With the overseas markets not reaching their lows yet, buyers are sitting on their hands. Sooner or later, they have to buy a few of these things."
New Zealand was in the middle of the December reporting period, which had not been particularly good. The forward outlooks indicated a continuation of tough times, he said.
The Dow Jones Industrial Average and the Standard and Poor's index had their lowest close in 12 years yesterday. Wall Street slumped as investors lost faith that the US Government would be able to stabilise the financial system.
Reports that the US Government might convert its stake in Citigroup into a big common stock did not help investor sentiment.
A joint statement from the US Treasury, Federal Reserve and banking regulators said the new "capital buffer" being offered could lead to bigger government stakes but with a strong presumption that banks remained in private hands. Analysts said the plan was the first step in the so-called "stress test" announced by the administration of President Barack Obama for banks hammered by the US housing meltdown and global credit crisis.
At Economy.com, Augustine Faucher said the measures set the stage for the Federal Government to take a greater ownership role in major US banks that faced funding problems, short of total government ownership.
"The Obama Administration is trying to avoid completely nationalising banks while making sure they have enough capital to survive."
Adding to the bleak picture, it was reported that insurer American International Group could be forced into bankruptcy if new rescue talks with the Government fail to secure it more funding.
Another $US10 trillion ($NZ19 trillion) of value in US stocks has been wiped out since the market's record high close in October 2007. So far this year, the Dow has fallen 19%, the S&P 18% and the technology-rich Nasdaq has dropped 12%.
Asian markets fell during the day, South Korean shares by nearly 4% in value soon after opening and Japan's Nikkei by 2.4% in mid-afternoon trading. Australian shares followed Wall Street, but not to the same extent.
Oil prices slid close to $US38 a barrel on growing economic worries and oil is now forecast to go down to below $US36.
