A spokesman for the Reserve Bank said the central bank was watching the global situation, but had not further comment.
Clements says the turbulence may be a "blessing in disguise" for exporters who have been dealing with an excessively high New Zealand dollar. The kiwi recently traded at 83.46 US cents, down from 84.43 cents at the end of trading in New York on Friday.
12.50: Finance Ministers and central bank governors of the world's seven largest developed economies, known as the G-7, are signalling a willingness to intervene in foreign exchange markets to cope with "excess volatility and disorderly movements" in major currencies.
In a statement just issued, the ministers said: "we reaffirmed our shared interest in a strong and stable international financial system, and our support for market-determined exchange rates."
"We are committed to taking coordinated action where needed to ensuring liquidity and to supporting financial market functioning, financial stability and economic growth."
They welcomed the US debt ceiling package, passed by Congress after 11th hour wrangling last week, and announcements by the Spanish and Italian governments about their intention to accelerate fiscal policy reforms to deal with their unsustainable public debt levels.
G-7 member countries are the US Britain, France, Germany, Japan, Italy, and Canada.
12.20: The Australian share market has just opened down more two per cent.
At 12.12pm, the benchmark S&P/ASX200 index was down 90.1 points, or 2.2 per cent, at 4,015.3, while the broader All Ordinaries index fell 93.6 points, or 2.25 per cent, to 4,076.1.
12.15: The Reuters news agency is reporting the Japanese Nikkei stock benchmark has just opened down 1.5 per cent while the broader Topix dropped 1.5 per cent.
11.45: It is small, retail shareholders - spooked by global financial uncertainty - who are selling off their NZX holdings this morning, one broker says.
The NZX-50 index fell by more than 3 per cent in morning trading.
"There certainly doesn't appear to be any large sellers in the market," said Grant Williamson, a director at Hamilton Hindin Greene. 'It does appear that there are a few retail investors who have decided that with the uncertainty around the world they'll put a bit of cash on the sideline."
He said "bargain hunters" were already coming into the market and buying up shares.
"They're taking an opposite view that the sell-down has been a bit overdone," said Williamson.
He said a large sell-off on Australia's ASX, which opens at noon New Zealand time would flow on to the New Zealand stock exchange.
It was too early to say how far the NZX could fall today, Williamson said.
"I think we need to wait and see what happens after midday and this afternoon in the Asian marketplace."
11.41:The NZX-50 is now down 100 points to 3176, a 3 per cent fall. Air New Zealand shares have been hit hard this morning. They are changing hands at $1.03 - down 7 cents or 7.2 per cent fall for the day.
Fletcher Building shares have fallen 21c to $7.50, a 2.7 per cent fall. Telecom has fallen a similar percentage, down 7c to $2.50. Contact Energy shares are down 11c, a 2.1per cent fall to $5.03.
11.16: US Treasury Secretary Timothy Geithner has slammed the rating agency Standard and Poor's as showing "terrible judgement" in downgrading the US credit rating for the first time ever.
"I think S&P has shown really terrible judgement and they've handled themselves poorly, and they have shown a stunning lack of knowledge about basic US fiscal budget math and I think they came to exactly the wrong conclusion," Geithner said in an interview with NBC News.
His comments came amid growing suspense over the impact on world financial markets of the downgrade of S&P's rating for US Treasuries from AAA to AA+.
11.06: Ben Potter, market strategist at IG Markets in Australia, said the ASX 200 "is called to open the new week sharply lower, down 3 per cent at 3985 after S&P 500 futures reopened 2.5 per cent lower this morning."
"As we saw on Friday, nothing will be spared this morning, especially in the first hour of trade as forced selling on the back of margin calls works its way through the system.
The cyclical sectors will almost certainly lead us lower with the likes of the material, energy, financial and industrial sectors likely to be the worst performers."
Potter says "it's going to be another blood bath today as we see forced selling due to margin calls in the first hour."
No one really fully understands the full implications of the US credit downgrade, he says, which is why we have seen the market sold off hard.
"It's a classic case of sell first, ask questions later. We feel there is a reasonable chance for some buying interest as the market begins to realise that it has overreacted to the downside."
10.55: The NZX opened down and has kept falling over the past hour. The benchmark NZX-50 is now down 110 points to 3166 - this is a 3.3 per cent fall. Shares in Fletcher Building, the largest listed company on the stock exchange, are down 4 per cent to $7.40.
10.45: Australian Treasurer Wayne Swan says Australia's economy is in good shape and can cope with the worst the world can throw.
Swan said he had been consulting regularly with Australian regulators, the Treasury and with finance ministers from the G20 group of advanced economies over turmoil overseas.
He said Australian economic fundamentals remained strong and the International Monetary Fund report released on Sunday showed that clearly.
Swan said he would not speculate on possible actions in event of a second global financial crisis.
Neither would he speculate on the response of the Australian Stock Exchange when it opens at today.
On Friday, the Australian share market followed other global markets, slumping by four per cent to its biggest one-day loss since the height of the global financial crisis almost three years ago.
10.41: "This is the fear side of the market showing its ugly head right now," said Alan Moore, who helps manage $600 million at Milford Asset Management. Still, "there doesn't seem to be any great degree of panic - 2008 was a far worse scenario than this one."
10.37: Today's early sharp fall came after the index plunged nearly 3 per cent on Friday, as investors feared further losses in US equities which had their worst selloff in two years on Thursday.
In early trading today Fletcher Building lost 26c or 3.4 per cent to $7.45, Mainfreight was down 23c or 2.2 per cent to $10.10, Abano Healthcare dropped 18c or 4 per cent to $4.30, Sky TV dropped 14c to $5.50, Contact Energy fell 13c to $4.90, Hallenstein Glasson was down 10c to $3.40, Sky City lost 14c to $3.36, Fisher & Paykel dropped 9c to $2.40, Ryman Healthcare was down 8c to $2.50, and Vector fell 8c to $2.35.
Stocks losing 7c early included Ebos Group to $6.70, Restaurant Brands to $2.20, Freightways to $3.25, and Infratil to $1.69, while OceanaGold lost 6c to $2.39, Nuplex lost 6c to $2.50, Auckland Airport lost 6c to $2.17, and Telecom fell 5c to $2.52.
10.05: The NZX-50 has fallen 2.1 per cent on opening. Wrightson has lead the market down falling 6.3 per cent.
09.59: Only a small amount of turbulence is expected on the share market this morning as it reacts to the news of the US credit rating downgrade, said NZX chief executive Mark Weldon this morning.
Weldon told Newstalk ZB that "it's more of a northern hemisphere issue".
"Fundamentally, companies here have cash, we're exposed to Asia and we'll gyrate but we're pretty sound," he said.
Weldon says there's a suggestion we could see the New Zealand dollar rise, but he says it could be a while before we see that play out.
09.49: The Reuters news agency is reporting the euro jumped on the US dollar in early Asian trade after the European Central Bank said it would "actively implement" its bond buying programme.
It said the ECB's step could "mark a watershed in the bank's fire-fighting after modest bond buying efforts last week failed to stem contagion, raising the prospect that the euro zone's third and fourth biggest economies could also face a debt crisis."
09.36: The Associated Press has filed a story that outlines what the weekend downgrade of the US credit rating could mean for world markets and the US economy:
The real fear is that the downgrade will add to building uncertainty in the stock market over Europe's debt crisis and evidence the US economy is weakening. That would compound the worries that sent the Dow Jones industrial average down 5.8 per cent last week 513 points on Thursday alone.
Rates on Treasury bonds also influence rates consumers pay on everything from mortgages to car loans. A rise in Treasury rates would send those rates higher and hurt Americans' ability to spend.
09.33: The European Central Bank has just announced that it would actively renew eurozone bond purchases after Italy and Spain announced new measures and reforms to bolster their finances and economies in general.
"It is on the basis of the above assessments that the ECB will actively implement its Securities Markets Programme,'' which purchases bonds issued by eurozone governments on secondary markets.
09.24: Democrats and Republicans in Washington need to stop blaming each other over the unprecedented US credit rating downgrade and find solutions, China's official Xinhua news agency said this morning.
The demand came in a lengthy and harshly worded commentary, the latest in a series in China's state media.
"Disappointingly, instead of reflecting on themselves and sitting down to fix problems in a cooperated way, the Democrats and Republicans... are questioning the creditability of the downgrade ruling and blaming each other for the ever-first shame of slipping out top-credit rating club,'' it said.
09.15: Word is spreading of a pending announcment that the European Central Bank will intervene in debt markets in an attempt to restore confidence in financial markets.
The Associated Press is reporting the European Central Bank is about to say it will 'actively implement' a bond-purchase program.
The move follows a frantic night of conference calls between EU and G7 finance ministers, keen to stop panic spreading across world markets when they open today.
Media reports are also quoting a Reuters source who says "The Euro system [ECB and national banks] will intervene very significantly on markets and respond in a significant and cohesive way,"
The Guardian is quoting UK market participants predicting more heavy falls when trading begins in Asia today and then in Europe tonight.
The New Zealand stock exchange opens at 10am.
Because the S&P downgrade came after the close of trading in London, the impact of the loss of America's AAA credit rating isn't fully 'priced in' to other world sharemarkets.
Martin Slaney, director of global dealings at GFT, is quote in the Guardian as predicting that the major European and Asian markets will open around 3 per cent lower than Friday's close in an "initial reflex panic selloff".
On the upside, Slaney reckons that traders will resist a full-blown Black Monday.
"Once the initial shock is digested, we are probably talking ripples rather than waves," he said.
- CHRISTOPHER ADAMS / NZ HERALD STAFF / AGENCIES
