New Zealand shares fall amid global stock rout

The S&P/NZX 50, which closed at a record high on December 31, was down 1.04 per cent at 6258.59 in early trading this morning. Photo / Bloomberg

New Zealand shares are falling on the first trading day of 2016 after markets on both sides of the Atlantic tumbled overnight amid renewed fears about the outlook for global economic growth.

The spike in volatility follows a monster sell-off in Chinese stocks yesterday, sparked by disappointing factory data for Asia's largest economy.

The S&P/NZX 50, which closed at a record high on December 31, was down 1.04 per cent at 6258.59 in early trading this morning.

Leading the index decline was accounting software developer Xero, down 4 per cent.

Shares in Metlifecare had fallen 2.8 per cent, while SkyCity had fallen 2.7 per cent.

Alternative dairy firm A2 Milk - the NZX 50's best performer in 2015 - was bucking the trend, with its shares up 5.9 per cent.

Shane Solly, portfolio manager at Harbour Asset Management, said a roughly 1 per cent fall in the benchmark index was "probably about right" given the events in overseas markets.

"This is a continuum of late 2015 market conditions where investors are becoming more selective about what they will and won't support after a strong performance in equity and fixed interest markets over the last few years," Solly said.

"There are a number of imbalances in global markets, for example in commodities, that have the potential to surprise investors."

The Australian share market is one per cent down this morning after the global fall. Soon after opening the S&P/ASX200 index was down 55.3 points, or 1.05 per cent, at 5215.2, while the broader All Ordinaries index was down 53.7 points, or 1.01 per cent, at 5269.1.

On Wall Street the Dow Jones industrial average closed down 276.09 points, or 1.58 per cent, to 17,148.94, the S&P 500 lost 31.28 points, or 1.53 per cent, to 2012.66 and the Nasdaq Composite dropped 104.32 points, or 2.08 per cent, to 4,903.09. Both the S&P 500 and the Nasdaq had their worst starts to a year since 2001.

This is a continuum of late 2015 market conditions where investors are becoming more selective about what they will and won't support after a strong performance in equity and fixed interest markets over the last few years.

The Stoxx Europe 600 Index plunged 2.5 per cent in its worst ever start to a year, with almost 580 stocks falling, while London's FTSE 100 fell 2.4 per cent in its worst new year start since 2000.

The volatility in European and North American markets followed a Chinese rout that saw the CSI300 - an index of the largest listed firms in Shanghai and Shenzhen - tumble 7 per cent, triggering a "circuit-breaker" measure that suspended trading in China for the first time.

A devaluation of the Chinese currency also weighed on investor sentiment.

Solly said economic changes taking place in China could continue to surprise markets in 2016.

"There's no doubt the Chinese authorities are working pretty hard to land the jumbo."

Investors have also been spooked by data showing the fastest contraction in US manufacturing activity in six years.

Geopolitical fears also increased following a rise in tensions between Saudi Arabia and Iran, sparked by the former country's execution of a prominent Shiite cleric, Sheikh Nimr Baqr al-Nimr, at the weekend.