All eyes on the Big Apple

By DITA DE BONI

Analysts are predicting the NZSE40 could be down but not out when it reopens for trading this morning after the five-day Easter break.

Much will depend on what happened in New York overnight after Monday's steep decline, when the Nasdaq - fuelled by a lower revenue outlook by Microsoft - fell 160.42 points or 4.40 per cent to 3482.48, marking its 10th-largest one-day point drop and third negative session in a row.

The Dow erased a 1.4 per cent drop, gaining 0.6 per cent to 10,906.10 with the rise of American Express and Merck. Without Microsoft, the average would have climbed 123 points.

Brett Wilkinson of Ord Minnett said all eyes would be on the Nasdaq's Tuesday close when the local market opened this morning.

``Investors will look for the Nasdaq to test previous lows. Personally I'm looking for a support level of 3200 to 3300,'' he said.

``Obviously, if the Nasdaq goes through this level local tech stocks will follow, but the NZSE40 should remain relatively stable at current levels.''

Though the principal stock markets showed signs of recovery last week, the New Zealand market closed on a soft trend, down 2.86 per cent over the four days.

Craig & Co's Brent Sheather said he also saw no huge movement in conventional stocks today but warned that the market was adjusting to more realistic returns all round.

``The days of stock market returns being a function of expanding price/earnings multiples looks to be clearly over,'' he said.

``What we can expect from returns globally is the sum of a dividend yield of around 1 to 2 per cent, plus gross national product growth of around 5 to 6 per cent.

``We had better get used to 7 per cent returns from the stock market.''

In the United States, inflated expectations and ``extremes'' in the market were also being blamed for Monday's Nasdaq tumble, although traders there were rallied by the index surging 130 points in the final 30 minutes of trading.