Sharemarket heads lower

The New Zealand sharemarket headed lower in early trading following a slide by equity markets around the world after China said it would raise banks' reserve requirements in a move that could dampen a nascent recovery from the worst global recession in decades.

The sudden central bank move came earlier than investors had expected and appeared prompted by concerns that a renewed surge in bank lending was flooding the Chinese economy with too much cash, risking overheating and a surge in inflation.

Around 10.15am the benchmark NZX-50 index was down 13.64 points to 3276.65, after falling 13.5 points yesterday as a decline that started on Monday from a 15-month high continued.

Fletcher Building shares fell 7c to $8.40 having yesterday reached a 12-week high, while Contact Energy lost 4c to $6.28 and Telecom eased 1c to $2.53.

Among other shares losing ground early were Tower, down 4c to $2.15, Sky City down 3c to $3.36, Methven down 2c to $1.65, NZ Refining Co down 2c to $3.78, Nuplex down 2c to $3.07, and Trustpower down 2c to $7.28.

Shares in Bay of Plenty electricity distributor Horizon Energy shot up, gaining 24c or 7.9 per cent, to $3.29, although only on small volume.

The sharp rise came after the Eastern Bay Energy Trust, which already owns 77.3 per cent of Horizon, said it wanted to buy the rest of the Horizon shares at $4 a share.

Other early risers included Hellaby Holdings, up 4c to $1.70, Steel & Tube up 3c to $2.98, Ryman Healthcare up 2c to $2.17 and Port of Tauranga up 5c to $7.15.

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In the United States, stocks fell in a broad selloff as investors pummelled financials on concerns about a potential government levy on banks, while Alcoa's weaker-than-expected results tempered optimism.

Based on the provisional data, the Dow Jones industrial average fell 0.4 per cent to end at 10,626.13, the Standard & Poor's 500 Index was down 0.9 per cent to 1136.16, and the Nasdaq Composite Index was down 1.3 per cent to 2282.31.

- NZPA