Shares hold up in global storm

While many overseas markets saw steep falls yesterday, the NZX-50 held its own in the face of yet another global equity sell-off.

The benchmark index fell during the day but ended up 0.04 per cent.

New York's Dow Jones Industrial Average closed down 1.6 per cent while the broader S&P 500 finished the day down 2.1 per cent.

At noon, Australia's benchmark S&P/ASX200 index was down 1.3 per cent, and closed down 0.77 per cent at 4,008.3. Asian markets also fell, with Japan's Nikkei 225 index dropping 0.2 per cent to 8602.96.

In the face of a return to global risk aversion, the New Zealand dollar fell from US79.01c against the greenback at midnight to US77.06 at 1.30pm yesterday. It finished the day at US77.84c.

James Smalley, a client adviser at sharebrokers Hamilton Hindin Greene, said the NZX-50 was following the direction of moves in overseas equity markets "but not necessarily to magnitude".

The low level of liquidity in this country's sharemarket meant there were not a lot of foreign investors buying and selling stocks, he said.

"And our stocks provide very good dividend yields - most people are happy to hang on if they're getting 9 or 10 per cent because if you put it in the bank all you're going to get is 4 or 5 per cent."

Traders overseas focused on remarks from German Chancellor Angela Merkel suggesting the second bailout package for Greece might have to be renegotiated. Some European leaders want banks to take bigger losses on Greek bonds. France and the European Central Bank oppose the idea.

Germany's parliament is set to vote on a measure that would give a European rescue fund more powers to fight the region's debt crisis. Finland's parliament approved the proposal yesterday, lifting some uncertainty over the debt crisis that has been dogging financial markets since late July.

Westpac senior markets strategist Imre Speizer said the sell-off in the New Zealand dollar was driven by general global risk aversion, rather than any specific news.

The kiwi might climb to US80c over the next two days, and then drop towards US72c over the next few months, he said.

Speizer said a return to the record levels in the cross rate last month was unlikely.

The New Zealand dollar hit a post-float high of US88.43c in early August.

"I'd pretty much rule out this year that we go above US86c again," Speizer said. "Even US85c would be a stretch."