NZ dodges bullet as global equity markets drop

New Zealand stocks yesterday largely dodged a global equity markets sell-off on worries about the sustainability of the past six months' rally.

Major US stock indices fell by about 2 per cent on Tuesday as investors looked past some favourable economic numbers and instead grew concerned about the fragility of the banking industry and the global economy.

European markets were also down on data showing unemployment in the 16 nations that use the euro rose to a 10 year high of 9.5 per cent in July. Germany's DAX was down 2.4 per cent, Britain's FTSE-100 fell 1.8 per cent and France's CAC-40 was off 2.4 per cent.

In the Asia Pacific region after sharp losses on China's sharemarkets earlier in the week, Japan's Nikkei 225 stock average retreated 2.5 per cent, to 10,263.34, Hong Kong's Hang Seng lost 1.8 per cent and Australia's ASX-200 closed down 1.7 per cent.

The NZX-50, however, ended yesterday's session down just 10 points or 0.3 per cent at 3074.65.

"The rest of the world's certainly in line with each other so we've definitely gone the other way almost," said Bryon Burke of Craigs Investment Partners.

The offshore equities market falls did drag the kiwi dollar lower as investors became more risk averse and it lost more than a cent in 24 hours to close at US67.54c at 5pm yesterday.

"That's dictated to a certain degree why our market hasn't fallen as much today, because it has, from an overseas investor's point of view because of the exchange rate," said Burke.

Local stocks that appeared most affected by the offshore sell-off included Fletcher Building, down 16c to $7.58, Fisher & Paykel Appliances, down 4c at 74c, and Hallenstein Glasson, down 16c at $2.70. Turnover was relatively light.

"You would expect on a day like today to get quite a bit of selling in stocks that have run quite hard," said Burke. "But no, these things are just really thinly traded. Too scared to sell is still the general feeling. Sell now and what do you do with the money, earn 2 per cent in term deposit?"

Across Asia, investors were showing little appetite for risky assets.

"People are a bit cautious. A lot of money has already flowed into the markets," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore.

"The question now for most investors is 'do I put more in at these levels or wait for it to correct more'."

Reserve Bank of Australia Governor Glenn Stevens warned that financial institutions needed to make more progress in restoring balance sheets weakened by the global economic downturn.

This weakness "constitutes one of the main remaining risks to the global expansion", he said.

AROUND THE WORLD
* NZX-50: -0.33 per cent
* ASX-200: -1.69 per cent
* Hang Seng: -1.76 per cent
* Nikkei: -2.37 per cent
* Dow Jones: -1.96 per cent
* FTSE 100: -1.8 per cent

- AGENCIES