NZ stocks: Shares tumble as global economic woes dominate

New Zealand shares tumbled sharply this morning as investors responded to a global wind-change from jubilation at the success of the coalition forces in Iraq, to concern over the global economic outlook, post-conflict.

"The reality out there is the global economy is still relatively soft and there's not one economy that will take up the slack like America has in the past," ABN Amro Craigs retail equities adviser Nigel Scott said.

The NZ50 gross index fell almost 30 points, or 1.45 per cent, to 1945.90 by 11.30am, while the NZSE-40 capital index was down 25.27 points, or 1.30 per cent, at 1916.47.

Turnover of 10 million shares was worth $28 million.

Falls outnumbered rises by 43 to 17 among the 101 stocks traded so far.

The dour global outlook was compounded by the release of the Institute of Economic Research's quarterly survey of business opinion locally.

It showed business confidence plummeted to a 17-year low in the March quarter as nervousness over the war in Iraq and possible power shortages in New Zealand took their toll.

The influential private think tank said a net 56 per cent of businesses are pessimistic about business conditions over the next six months -- the lowest level since December 1985.

The seasonally-adjusted figure compared with a net 9 per cent who expected a deterioration in the December survey.

"Once Iraq goes away, attention will return to other factors overseas -- the US economy is shaky and Australian confidence is low," senior economist Mark Walton said.

Among the leaders Telecom dived 14c to 458, Carter Holt Harvey was 2c lower at 163, Briscoe Group fell a cent to 188, Baycorp Advantage fell 3c to 149, Fisher & Paykel Healthcare lost 5c to 1000, its Appliances cousin was off 4c to 1026, Fletcher Building dropped 6c to 318, and Sky City was 7c lower at 808.

Of the top 10 stocks only The Warehouse was steady at 548.

Tourism stocks also took a hit as a cluster of negative news from the sector began to snowball.

Auckland International Airport was 20c lower at 504, Air New Zealand fell 2c to 46c and Tourism Holdings was 6c lower at 95c.

"It seems we're finally getting some reaction to the economic tourism type news around the place with announcements from Qantas and people not travelling as much," Mr Scott said.

Qantas said yesterday it would make 1000 staff redundant as the impact of war in Iraq, a deadly flu virus and general weak economic conditions bite. Air NZ has reduced flights to Asia as a result of the virus.

The airlines are under the spotlight today, with competition regulators on both sides of the Tasman set to release draft determinations on a proposed alliance.

The alliance, which would allow Qantas to buy a 22.5 per cent stake in Air NZ for $550 million and the two to co-ordinate services, is widely expected to be rejected as anti-competitive.

Tranz Rail lost 5c to 74c after announcing yesterday it has severed its ties with ratings agency Standard & Poor's. Wayne Collins, the trouble rail operator's chief executive, said Tranz Rail no longer required its BB- plus credit rating for funding purposes.

In the United States stocks fell on Wednesday as Wall Street fretted over the US economy and company profits, halting a rally sparked by TV footage from Baghdad showing Iraqis celebrating the apparent end of Saddam Hussein's rule.

"People are not dancing on Wall Street," said Al Kugel, senior investment strategist at Stein Roe Investment Counsel.

"There are people saying now that the war is over, we need to look at the economy and it looks pretty sick."

The blue-chip Dow Jones industrial average dropped 100.98 points, or 1.22 per cent, to 8197.94, after surging more than 1 per cent earlier. The tech-laced Nasdaq Composite Index sank 26.20 points, or 1.89 per cent, to 1356.74. The broad Standard & Poor's 500 retreated 12.30 points, or 1.40 per cent, to 865.99.

- NZPA