KEY POINTS:
New Zealand shares suffered yet another day of losses yesterday but escaped the worst of a global market rout sparked by fresh news that US credit problems were spreading.
The benchmark NZX-50 index closed 50.6 points, or 1.23 per cent lower, at 4109.8 after sub-prime-related credit woes again weighed on US stock and debt markets.
The US Dow Jones index closed 2.8 per cent lower on Thursday, as financial stocks, including Goldman Sachs Group, were hammered hardest.
The US problems set the tone for other major markets, with Japan's Nikkei down 3 per cent and Australia's ASX closed down 3.7 per cent.
The supply of money also dried up on international markets, forcing central banks to inject extra liquidity to ensure stability.
The European Central Bank pumped a record €94.8 billion into Europe's money markets after France's biggest listed bank, BNP Paribas, froze withdrawals from three funds hurt by problems in the US subprime mortgage market.
The US Federal Reserve injected US$24 billion and the Bank of Canada C$1.64 billion ($1.55 billion). While the operations were larger than normal, analysts said they did not amount to an emergency injection of liquidity.
The Reserve Bank of Australia was also believed to have injected double its normal daily amount of funding into the banking sector yesterday.
Japan's central bank injected 1 trillion ($11.3 billion) into money markets.
Currency markets were also affected with the New Zealand dollar plunging more than US2c, or 3 per cent, to a two-month low of US74.45c.
It has fallen 8.8 per cent in less than a month since hitting a post-float high of US81.6c.
"Things are getting a bit scary," said First NZ Capital research manager Barry Lindsay.
The local sharemarket's losses, while not as heavy, were "pretty much as one might have expected having heard what transpired offshore overnight".
"There is certainly a lot of anxiety about, probably less so here because our companies are not exposed to sub-prime and the credit crunch.
"The fact that central banks have injected liquidity into the system shows they're treating this as serious."
Much of the reasonably heavy trading was down to Telecom, which actually ended the day a cent higher at $4.35. But a number of other top stocks which had recovered from previous sell-downs, such as Contact Energy and Fletcher Building, again lost ground.
Nevertheless, "we haven't dealt with anything that comes near to being called panic selling", said Lindsay.
Macquarie Equities investment director Arthur Lim said the market's recent whipsawing was resulting in investors preferring to stand on the sidelines until things settled a bit.
Turnover suggested investors were lightening their portfolios rather than stampeding for the exits.
Lim noted the market's overall trend over the last three years had been positive, and each time there had been a dip it had rebounded higher.
"But the question that arises every time is, 'Is this the big one? Is this the one that's going to fundamentally turn the market on its head and reverse the uptrend?'."
However, he believed the positive overall global outlook meant that was probably unlikely.
While the central banks' injection of extra liquidity could be taken as an indication of serious problems, it could also be seen as an effective way of heading them off.
Rickey Ward, of fund manager NZ Guardian Trust, said given the market's recent record of great returns "there's got to be a period of consolidation".
"It's good to have a bit of a breather, but the volatility we can do without."
Around the world
* New Zealand: NZX-50 closed down 1.23 per cent at 4109.8.
* Australia: The S&P/ASX200 index tumbled 229.6 points, or 3.7 per cent, to 5936, its biggest one-day fall in six years.
* United States: The Dow Jones industrial average sank 2.83 per cent overnight Thursday. The Standard & Poor's 500 Index slid 2.96 per cent. It was the worst percentage drop for both indexes since February,
* Asia: Japan's Nikkei closed down 406.51 points or 2.37 per cent, the lowest close since March. Hong Kong's Hang Seng index ended the day down 2.88 per cent.
* UK: The FTSE UK 100 benchmark index closed down 122.7 points, or 1.92 per cent overnight Thursday. The index dropped 1.7 per cent in early trading last night.
- Additional reporting: agencies
