KEY POINTS:
The sharemarket dived 1.5 per cent in early trading today in response to a hefty sell-off in the US market.
The local sell-off was against a backdrop of a US2c plunge in the kiwi dollar following the Reserve Bank's signal yesterday that the tightening phase had finished.
The kiwi's fall is mixed for shares with export stocks benefiting but the overall market depressed as foreign investors liquidate on fears the currency may have peaked and be starting a long downtrend.
The benchmark NZSX-50 index, which ended less than 20 points off its record yesterday, lost 65.9 points in the first 10 minutes to be at 4259.88.
Market leader Telecom lost 12c to 470, Fletcher Building lost 33c to 1265 and Contact Energy lost 18c to 947.
In the US, key indexes lost over two per cent, in one of the worst sell-offs this year, with investors gripped by housing market and "credit crunch" fears.
The Dow Jones Industrial Average fell as much as 448 points before bouncing back somewhat, showing a loss of 308.90 points (2.24 per cent) at 13,476.17 just after at the closing bell.
It was the worst day for the blue-chip index since the February 27 tumble in the wake of a stock market collapse in Shanghai, in which the Dow average lost 416 points.
The tech-heavy Nasdaq composite sank 48.83 points (1.84 per cent) to 2599.34 and the broad-market Standard & Poor's 500 index slid 34.74 points (2.29 percent) to a preliminary close of 1483.35.
Selling was across the board with Goodman Fielder the only stock in the top 50 with a green up arrow beside it, and it was only up 1c to 280.
Almost every stock was punished. Among the bigger falls, Air NZ lost 9c to 246, BIL 8c to 125, Mainfreight 16c to 750, Port of Tauranga 22c to 690, and Westpac 80c to 2840.
"Risk aversion goes up in times like this," said Matt Willis of ABN Amro Craigs. "Unwinding positions is a natural result."
He said the dollar's fall had contributed.
"If you were a foreign investor and took the view that this is the beginning of a long-term downtrend in the New Zealand dollar, now might be the time to lock in some profits."
He said the fundamentals of the currency and the equity market were still supportive.
"However, for various reasons today, you are going to see money heading for the door."
"It's mainly to do with the weakness in global markets overnight. This is one of the biggest falls we've seen in a long time. It's logical there will be a rub off."
He said the credit crunch in the US that had precipitated the sharemarket fall in the US was not replicated here.
"The problems being experienced in the US market is unique to that market but nonetheless it's logical when the major markets sell off to the extent that they have that there is an impact on ours."
There were 11 rises compared with the 54 falls among the 95 stocks traded.
Turnover was about normal at $60 million.
By 10.30am, the market was down 1.75 per cent, or 75.18 points to 4250.
- NZPA
