The New Zealand sharemarket remained relatively calm after United States bourses took a surprising tumble yesterday despite US Government proposal for a $2 trillion ($NZ3.7 trillion) aid package for its ailing, debt-ridden, finance sector.
The NZX SE 50 started down slightly at -0.8% and the loss grew to more than 1% by midday, but it ended the day down 19 points, or 0.72%, on light turnover of $75 million.
In the previous day's US trading the Dow Jones took a nose dive to its lowest levels since late-November.
New Zealand stocks initially affected by the US plunge included Fletcher Building, down 7c to $5.45, Telecom, down 4c to $2.59, and Contact Energy, losing 6c to $6.65.
The US Treasury unveiled a new $US2 trillion bank rescue package, to deal with the toxic debt which has prompted the global credit crunch.
However, US investors sold down stocks largely because of the lack of detail accompanying the latest package.
While US equities languished to their largest percentage falls in about 10 weeks and oil weakened further to $37.54 yesterday on expectations of further global weakening, global spot gold prices rose 2.5% from $US892 to $US914, as investors fled to safe havens, including a rush towards US government bonds.
ABN Amro Craigs broker Peter McIntyre said the US markets were struggling with the new bail-out proposal and whether it could achieve its goal.
He believed the US bourses would likely re-test the lows hit last November because of the growing negative investor sentiment.
The New Zealand market remained relatively untouched from the US plunge, largely because of a good financial result posted by the Commonwealth Bank of Australia yesterday, Mr McIntyre said.
It maintained its dividend payout and profit was up.
Mr McIntyre noted, however, its chairman had warned its debt levels were rising and also the likelihood dividends would be cut in the future.
"Our market is continuing not to reflect the volatility we are seeing overseas," Mr McIntyre said.
He believed changes were required in the relatively new two-year-old international accounting standard `mark to market', which saw company balance sheets deteriorate as assets were written down.
Forsyth Barr broker Peter Young said the US market reacted badly, indicating issues may be far worse than first thought and that the initial $US800 billion package really was not enough.
"The New Zealand [market] reacted badly at first but it clawed back to be only 17 points down down, on light turnover of $62 million," he said before the close of trading at 5pm.
"New Zealand investors are really just sitting on the sidelines waiting to hear how Fletcher Building and Telecom report [today and tomorrow, respectively] and, more importantly, what their forward outlook and comments are," Mr Young said.
He noted the US futures market was up in early US trading yesterday, before the Dow Jones opened, which might give an indication of a positive night ahead for the offshore markets.
