Momentum on Wall Street switched from a massive share sell-off during the past week to an upswing after the United States' central bank, the Federal Reserve, confirmed it would maintain its cash rate at near-0% interest rates during the next two years.
Shares on the NZSE50 index were initially up 5% yesterday, after several days when few companies posted gains, as investors scooped up shares trading well below their true value.
Similarly, the ASX was up 3.8% in early trading, dropping back to a 3% gain, while at 5pm the NZSE50 closed up nearly 96 points, or 3%, for the day.
Craigs Investment Partners broker Peter McIntyre said the likelihood was for market volatility to continue for the short term, until the European debt crisis was solved.
The recent days' large share price fluctuations, including blue chip companies posting significant price swings, offered opportunities, but "for the brave investor", Mr McIntyre said.
Around the world "bargain-hunting" investors and large institutional investment funds had begun "stepping in to buy beaten-down equities after recent dramatic declines", Mr McIntyre said.
After Monday's heady losses of between 5% and 7%, Wall Street on Tuesday rallied after the Federal Reserve announcement, and the blue-chip Dow Jones index closed up 3.98%, the tech-heavy Nasdaq up 5.29% and broader Standard & Poor's 500 up 4.74%.
The S&P 500 had fallen almost 17% in recent weeks and Tuesday's gains represented its best day in more than two years.
The Nasdaq underwent a massive 12.19% swing, losing 6.9% on Monday and clawing back 5.29% on Tuesday.
Despite Tuesday's strong rally, the three major US indexes remained in negative territory for the year.
Exchange indexes in the United Kingdom and Europe followed suit, reversing some losses.
Forsyth Barr broker Suzanne Kinnaird said UK stocks rose from a one-year low on the back of the Federal Reserve announcement, with the key FTSE 100 Index closing 1.9% higher, on earlier falls of up to 5.5%.
"Mining companies rebounded from an 11-day sell-off as metal prices advanced in London," Ms Kinnaird said.
Japan's Nikkei index fell 1.7% and Hong Kong's Hang Seng index lost 5.7% after China reported its inflation rate had accelerated to the fastest pace in three years, restraining the Government from easing monetary policy as risks to the global economy mounted, Ms Kinnaird said.
However, the ASX 200 climbed 1.2%, after a massive fall of around 5.0% when the market opened, on the back of data released that day, which included an unexpected improvement in business confidence in July.
On Tuesday about 16.4 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq - more than twice the daily average so far this year of 7.75 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of almost 12 to one, while on the Nasdaq almost five stocks rose for every one that fell.
- Additional reporting by Reuters
