Focus Live: NZX follows global slump as coronavirus and oil crash hit home. ASB Economist Nick Tuffley warns a recession is likely.
The New Zealand share market has gone into correction territory with a 5 per cent fall in the opening minutes of trading.
This follows moves on international markets, which saw all major stock markets, led by the US stock market, fall on the back of the spread of coronavirus and yesterday's oil crash.
At 10,642 points, the S&P/NZX50 was down 444 points at 10,642, having fallen 3 per cent on Monday.
Stocks went into a steep slide on Wall Street this morning (US time) as coronavirus fears and a crash in oil prices spread alarm through the market, triggering the first automatic halt in trading in over two decades to let investors catch their breath.
The price of oil sank nearly 20 per cent after Russia refused to roll back production in response to falling demand and Saudi Arabia signalled it will ramp up its own output. While low oil prices can translate into cheaper petrol, they wreak havoc on energy companies and countries that count on petroleum revenue, including the No 1 producer, the US.
The clash between the two giant oil producers came as Italy — the country hit hardest by the coronavirus in Europe — began enforcing a lockdown against 16 million people in north, the heart of its manufacturing and financial industries. The turmoil is expected to push Italy into recession and weigh on the European economy.
"We are just now starting to see some investors panic a bit on the sell side," Hamilton Hindin Green director Grant Williamson said.
US stocks fell hard enough after the open to trigger a 15-minute trading halt. Last night was the first time the Dow Jones Industrial Average lost more than 2,000 points in one session.
Markets were roiled by ongoing concerns about the spread of Covid-19 and its impact on global growth and after Saudi Arabia launched an oil price war with Russia.
The S&P 500 shed 7.6 per cent, the Dow Jones Industrial Average ended down 7.8 per cent while the Nasdaq lost 7.3 per cent. The three indices are now down around 19 per cent from record highs set earlier this year.
"Until we start to see some improvement in the numbers there, I think investors will remain very nervous. But certainly, at some stage, we will see a bit of bargain hunting."
Mark Lister, head of private wealth research at Craigs Investment Partners, said most of the markets' downward moves were oil price-related.
Most of the offshore markets centred on big declines in the major oil company stocks. "I think we will hold up better than most," he said.
For perspective, the local market is now back to where it was August last year - a year in which the index gained 30 per cent.
"We have had a hell of a run and things had probably gone a bit too far - people were looking for a reason to sell."
Matt Goodson, managing director at Salt Funds, said yesterday's 3 per cent decline on the local market would have been worse had it not been for a last-minute rally in respiratory systems specialist Fisher and Paykel Healthcare, which is seen as a beneficiary of the coronavirus outbreak and the sharply weaker New Zealand dollar.
But yesterday's strength in F&P Healthcare was quickly reversed this morning, the stock losing $1.94 or 7.2 per cent to $24.83.
