KEY POINTS:
Fired by welcome signs that international and local measures to restore confidence to the battered banking system are gaining some traction, investors followed the overseas lead to send the New Zealand sharemarket rocketing yesterday.
Snapping a woeful seven-day losing streak that tore a 14 per cent chunk off the benchmark index, the NZX-50 climbed almost 7 per cent at one point early in the session before closing up 5.99 per cent or 166.6 points at 2948.94.
The local gains came after Wall St's Dow Jones industrial average gained more than 11 per cent on Monday - its biggest one-day gain since 1933 as traders reacted with relief to efforts by the US Government to inject capital into banks and get lending flowing again.
In Tokyo the Nikkei average soared 14.2 per cent, the biggest one-day gain in its 58-year history, while the Australian ASX200 closed 3.7 per cent up.
In contrast to last week's palpable gloom, local brokers were clearly relieved and cheered by yesterday's gains, although that was tempered with caution.
"We've probably seen the worst of the banking and financial crisis overseas," said Hamilton, Hindin, Greene broker Grant Williamson, "but what we probably haven't got over is that a lot of these economies are going to go into recession so there's still a lot to be concerned about out there."
Williamson said the Government's move to guarantee local deposits, in addition to the massive injections of funds into the US and other offshore banking sectors had clearly restored some confidence.
"It is encouraging. We seem to be making history every week at the moment."
Williamson said the buyers yesterday appeared to be mainly retail investors who had been sitting on the sidelines with cash.
Standout performers included defensive stocks like Contact Energy up 42c to $7.47 and Auckland Airport up 15c to $1.82.
"The blue chip stocks are up 5, 6 or even 7 per cent, it's pretty impressive stuff but it's really only recovering a portion of what was lost last week."
Nigel Scott of ABN Amro Craigs said it was "early days".
"The key thing here is that at least we've found a level for the market to look to try and deal at."
He observed local investors for the most part hadn't sold down their holdings aggressively when the market was on the way down, "so we shouldn't be looking to participate too aggressively on the way up".
Scott said the key thing over time was to see some sanity return to offshore credit markets.
