Wall Street had its worst one-day points fall in history. Photo / AP
Wall Street had its worst one-day points fall in history. Photo / AP
Dazed and confused investors took some comfort from signs of stability in Asia-Pacific sharemarkets after the oil price slump and concerns about the spread of Covid-19 drove Wall Street to its worst one-day fall since the Global Financial Crisis.
America's benchmark S&P 500 index plunged 7.6 per cent on Monday,taking losses incurred since February 19 to just shy of the 20 per cent deemed by traders as a bear market.
The US market then rallied last night as investors as bargain hunting and stimulus hopes calmed investors' fears of recession and uncertainties surrounding the coronavirus.
By 9am Wednesday (NZ Time) the Dow Jones Industrial Average had climbed 4.89 per cent to be up more than 1,160 points. The S&P 500 added 4.94 per cent and the Nasdaq Composite gained 4.95 per cent.
The New Zealand share market's S&P/NZX50 index ended Tuesday 1.7 per cent down at 10,895 but well off its low for the day of 10,549, while the Australian sharemarket rebounded strongly to end in positive territory.
Early in yesterday's session, the Australian sharemarket at one point was off by 22 per cent from its record high and fitting - albeit briefly - the definition of a bear market, but ended the day in slightly positive territory.
"The market's dazed and confused," Imre Speizer, senior markets strategist at Westpac, said.
"It's been panicked over the last week, so I would not be surprised to see a bit of a pause in the severity of the selling," he said.
"Every government around the world is trying to figure out what the response should be - our own also - but we have not had a lot of detail."
Reserve Bank Governor Adrian Orr, in a speech, talked about the possible options available to the bank, should economic conditions deteriorate further.
Among them, a negative official cash rate, was seen in the markets as being the most likely option, should it come to that.
The central bank's next review of the official cash rate is due on March 25, and expectations are for a 25 basis point rate cut from the current 1.0 per cent.
The New Zealand share market's S&P/NZX50 index ended 1.7 per cent down at 10,895. Photo / File
Financial markets are now pricing a still lower fed funds rate, following on from the US Federal Reserve's emergency 50 basis point cut last week.
"The most eye-watering is that for the Fed's next meeting on March 18, markets have priced in a 100 per cent chance of 75 basis points in cuts," Speizer said.
That talk of more US rate cuts saw the US dollar trade lower, which in turn gave the New Zealand dollar some resilience around US63c.
Mark Lister, head of private wealth research at Craigs Investment Partners, said most of the markets' downward moves were oil price-related, or linked to the banking sector.
As the local market was under-represented in both areas, he expected it to hold up better than most.
At current levels, the New Zealand sharemarket is back to where it was in November last year.
"We have had a hell of a run and things had probably gone a bit too far," he said.
Local fund managers aren't rushing out the door in the latest bout of market turmoil and at least one is using it as a chance to buy cheap.
America's Volatility Index - known as Wall Street's fear gauge - spiked to its highest level since the 2008 global financial crisis.
Fisher Funds portfolio manager Sam Dickie told BusinessDesk he would buy stocks despite the downturn, using excess cash because his portfolio was slightly underweight in equities.
"We are deploying some cash into the market," Dickie said. "On a five- to eight- to 10-year view, the outlook is not different from yesterday.
"We are doing this gently because we don't know the magnitude and duration that coronavirus is going to have," he said.
