Shares edge down in early trade

The New Zealand sharemarket edged lower in early trading, after the Reserve Bank left interest rates unchanged in early trading but indicated it was prepared to move lower if the kiwi dollar stayed high.

"The forecast recovery is based on a further easing in financial conditions. If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings," Reserve Bank Governor Alan Bollard said when announcing the official cash rate would stay at 2.5 per cent.

Meanwhile, stocks in the United States fell as investors worried that China's banks might be ready to hit the brakes on lending to stem market excesses, a move that could curb the global economic recovery.

Around 10.15am the benchmark NZX-50 index was down 1.03 points to 2989.44, after falling 28 points yesterday as it took a breather following rises in the previous 11 trading days.

Top stock Telecom was up 2c early to $2.83, after falling 7c yesterday. Among other leaders, Fletcher Building was down 2c to $7.05 on top of yesterday's 20c fall, while Contact Energy slipped 2c to $6.20, having dropped 7c yesterday.

Among stocks falling early, NZ Oil & Gas was down 4c to $1.56, Hallenstein Glasson slipped 3c to $2.61, Sky TV dropped 2c to $4.38, Rakon lost 2c to $1.41, and Port of Tauranga gave up 2c to $6.32.

Early risers included Sanford up 4c to $5.29, NZ Farming Systems Uruguay up 3c to 50, and Methven up 2c to $1.42.

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Overseas, China's two biggest state-owned commercial banks have put a lid on their 2009 lending targets, according to domestic media reports.

Such a move would significantly slow overall Chinese credit growth in the year's second half.

Concerns about China hurt commodity prices and hit US shares in the energy and raw materials sectors, while a steep drop in US durable goods orders in June fed fears of more economic weakness.

"China has been a big driver of part of the global recovery. Their stimulus is direct and quick," said Bobby Harrington, managing director of Boston trading for UBS.

Slower growth in China's economy "could limit upside and create downward momentum" in the US stock market, he said.

The Dow Jones industrial average dropped 0.3 per cent to close at 9070.72, the Standard & Poor's 500 Index fell 0.5 per cent to 975.15, and the Nasdaq Composite Index lost 0.4 per cent to 1967.76.

- NZPA