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A welcome respite from Wall St's woeful start to the year failed to put any fire into the local sharemarket but pushed the New Zealand dollar to a six-month high yesterday.
US stocks rose on Monday, thanks to a strong earnings report from IBM and growing prospects for a hefty rate cut by the Federal Reserve Bank.
The Dow Jones Industrial Average rallied 1.37 per cent, the tech-heavy Nasdaq composite lifted 1.57 per cent and the Standard & Poor's 500 index advanced 1.08 per cent.
The NZSX has followed US markets down since the beginning of the year, but the rally on Wall St failed to inspire investors and the NZX-50 index closed 13.71 points or 0.36 per cent lower at 3810.50 in its ninth consecutive day of losses.
"The biggest marginal buyers in our market are really offshore investors," said Forsyth Barr research manager Rob Mercer.
"So you're not always going to get exact timing of some of these bounces depending on just what issues they're facing in their own market.
"There's a lot of anxiety and a lot of extrapolation around credit crunch and sub-prime and these sorts of things but just what the real flow-on impact it will have on the wider market I think is definitely being overplayed at the moment.
"We look at the current weakness as being a good time for people to pick over the stocks that have been oversold and accumulate those companies that have got a good sound earnings outlook."
The US reporting season has already begun.
"Those results are going to be much needed to provide some sort of support to markets after a pretty soft start to the year."
IBM's 24 per cent increase in quarterly profit topped most expectations and helped allay fears of soft corporate earnings in response to slipping economic conditions.
Other US tech shares gained on the news and the broader market rallied in response.
Also helping was growing sentiment that the Federal Reserve would slash interest rates substantially to counter economic weakness.
It did little for local shares, but the prospect of a big Fed rate cut sent the US dollar lower and the kiwi dollar soaring, reaching as high as US79.21c shortly before it ended the local session at US79.14c, its highest close since July last year.
Westpac currency strategist Michael Gordon said that for some time now, the forex market and the kiwi dollar's moves had tended to be correlated to US equities. "The kiwi's been supported by this growing view that the Fed is going to cut rates quite aggressively to effectively provide insurance against a US slowdown."
Bank of New Zealand currency strategist Danica Hampton said the move over US79c was down to a weaker US dollar and a stabilisation in US equity markets.
"The Fed's dovish policy stance makes a stark contrast to the Reserve Bank of New Zealand and the widening of NZ-US interest rate spreads has underpinned the NZ dollar/US dollar."
SEE ALSO More on the markets - C5
