It's official: NZ sharemarket slides into bear market after Wall Street rout

New Zealand share prices are now in bear market territory. Photo / 123RF

New Zealand share prices are in bear market territory after a sharp sell-off on Wall Street overnight.

Other markets were also very weak.

The US share market went into a technical bear phase after the late-session rout; the key S&P 500 index sliding 3.9 per cent to close at its lowest level since January 2021.

US Government bond yields soared, in anticipation of an aggressive monetary tightening by the US central bank to combat high inflation.

New Zealand bond yields spiked to multi-year highs in response.

Much of the US market's weakness stemmed from last week's US inflation data, which showed US consumer prices rose by 8.6 per cent, year-on-year, in May.

The local market has been on the cusp of a bear phase - defined as being a 20 per cent decline from a market's recent peak - over the last few trading days.

Among the movements, Mainfreight fell $2.90 or 4 per cent to $69.90.

Fisher and Paykel Healthcare, the country's biggest stock by market cap, dropped 19c or 0.9 per cent to $19.81.

By early afternoon, the S&P/NZX50 was at 10,589 points, down 3 per cent from Monday's close.

At that level, the index is 21.8 per cent down from its record closing high, reached on January 8, 2021, of 13,558.19.

The Australian market - which was closed on Monday for a holiday - was also sharply weaker, the S&P/ASX/200 index falling by 4.7 per cent to 6,606.

"We are very much in a bear market," Harbour Asset Management portfolio manager Shane Solly said.

In the US, there is now a fear that the Federal Reserve may this week raise its Fed funds rate by 75 basis points compared with the consensus of expectations of a half point rise.

The US stocks that had previously held up well - energy and utilities companies - were singled out for selling in response to expectations of slowing economic growth and the potential of recession.

"The recession deniers are going to have to wake up because the move up in interest rates and the removal of liquidity is definitely leading us down the path towards a risk of recession in the US and globally," Solly said.

The highly speculative end of the markets, such as cryptocurrencies, were looking sick after cryptocurrency bank Celsius moved to halt withdrawals by its nearly two million users.

For sharemarkets - which had been bolstered by easy credit conditions - it was a reset that the market had to have, Solly said.

"Markets do this but we are getting more rational price settings going forward," he said.

"It feels pretty ugly at the moment but it's the reset that we need to have going forward."

In the US, the yield on the benchmark 10-year Treasury note rose 0.21 percentage points to 3.36 per cent, its highest level since 2011.

Locally, wholesale interest rates shot higher across the curve in response to the action in US treasuries.

The local two-year swap rate rose 19 basis points to 4.32 per cent and the 10- year swap gained 15 basis points to 4.45 per cent.

In Government paper, the 10-year bond gained 16 basis points to 4.21 per cent.

"It's all global - the last 100 points have been global," BNZ senior market strategist Jason Wong said.

"Central banks are trying to get on top of inflation and no one knows where the peak should be, so they are just pushing rates higher."

The New Zealand dollar remained under downward pressure, trading at US62.6c.