KEY POINTS:
The New Zealand sharemarket looks to have shrugged off the jitters that struck global markets overnight.
Our market did start weaker, on a day when Wall Street ended with a mild recovery on the Dow.
However, the NZX-50 index was inching back into positive territory at 3432 at 2.30pm.
In Sydney, the benchmark S&P/ASX200 index was steady at 5080, two and a half hours into the day's trading.
The local market had plunged 2 per cent yesterday to a two-year low after the US market plummeted on Friday at the near collapse of a major financial house. It was down another 0.6 per cent in the first quarter of an hour's trading today.
The NZ market is down over 20 per cent from its last peak in October, meaning it is in a bear market.
Brokers said the market was extremely quiet but there was an absence of buying.
"The market is lacking confidence or buyers," Hamilton Hindin Greene broker Grant Williamson said.
He said that although the US market stabilised, the local market was catching up with Asian and European markets that fell heavily yesterday and overnight.
He was hopeful, however, that stocks might pick up this afternoon as bargain hunters move in.
"I think later on in the day we should start to see some positive moves on the markets and that might create a bit of buying on our market.
"But it going to take a wee bit to turn this market around because confidence is so low."
US blue chips posted small gains as Wall Street kept calm after plunges in global markets linked to the sliding dollar and fears of fallout from the meltdown of investment giant Bear Stearns.
In highly volatile trade, the Dow Jones Industrial Average gained 0.13 per cent to 11,966.66 at the closing bell.
The contained losses came in contrast to other global markets. Most European shares were down at least two per cent. The main Hong Kong share index plunged over five per cent while Britain's leading index, the FTSE 100, fell 3.9 per cent.
An emergency cut on Sunday by the US Federal Reserve to its discount rate and a weekend deal for JPMorgan Chase to buy investment bank Bear Stearns at a fire-sale price created a sense of crisis sweeping through global markets.
"Investors continue to ask whether we are in the midst of a bottoming process or whether the floor of the markets is about to collapse," said Bob Doll, analyst at BlackRock.
"Our best guess is that we are nearing bottom rather than beginning a more significant collapse, and that we are not that far from the bottom."
The NZSX-50 index, down 71.4 points yesterday to a two-year low, was down another 23 points to 3407 at 10.20am.
Here financial markets are starting to price in the possibility of the Reserve Bank moving more quickly than expected to lower official interest rates the prospect of recession looms here.
Telecom held steady on its 15 year low of 375 while Fletcher Building fell 1c to 850 and Contact Energy dropped 25c to 820. Other big falls included Fisher & Paykel Appliances, 8c to 231, Sky TV 6c to 475, Steel & Tube, 17c to 275, Warehouse , 4c to 595, and Cavalier. 11c to 250.
The only stocks to rise in the top 50 were Sky City, up 3c to 380, NZ Oil & Gas, 2c to 124 and Goodman, 5c to 195.
Andrew Kelleher of ASB Securities said Wall Street's performance today had lifted pessimism.
Obviously people were reassured the Fed would do everything it could to ensure liquidity was sufficient to meet what was a short term confidence issue, he told Radio NZ.
It was good to see some confidence, although it was still only tentative, Mr Kelleher said.
While this country did not have the same issues as the US market did, the tentacles of what started as a subprime issue in the US were now reaching out into what he would call the prime markets.
"In other words, good quality borrowers are now being affected by the subprime crisis," he said.
New Zealand relied on imported capital which professional funders could still source offshore, but the cost of it was going up.
Economists are apprehensive of more credit problems after news on Friday night that major US investment bank Bear Stearns needed emergency funding and was today taken over by JP Morgan for a fraction of last week's value.
Macquarie Equities investment adviser Arthur Lim said the significance of the Bear Stearns affair had to be acknowledged, but New Zealand was not as highly correlated to Wall St as other countries.
Investors would either sit on the sidelines or get spooked, "and we are certainly seeing that today".
Market watchers were also cautious about a speedy move by the US Federal Reserve to restore confidence today.
It cut the discount rate it charges on direct loans to banks and set up a new programme to provide cash to a wider range of financial firms - tools it has not used since the Great Depression.
"Desperate times need desperate measures," Craig James, chief equities economist with Commsec in Sydney said.
"There may be more bad news out there but investors should take the view that the Fed is not going to sit idly by."
- NZPA