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09-16-2008, 12:00 AM
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US markets turmoil hits NZX
Tuesday, 16 September 2008
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Reuters
LEHMAN COLLAPSE FALLOUT: While a global slowdown over the collapse of Lehman Brothers in the US won't be good for New Zealand markets, a silver lining could be an increasing chance of another Reserve Bank interest rate cut next month.
Related Links
Dow records biggest drop in 7 years
FTSE drops 3.9 percent after Lehman
Comment: We will survive
Wall Street collapse reverberates
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AdvertisementLATEST: The New Zealand sharemarket plunged in the first few minutes after opening today, following a night of turmoil in the world financial system.
Around 10.20am the benchmark NZSX-50 index was down 76.32 points, or 2.3 percent, to 3243.58.
The pain continued for top stock Telecom, down 9c early to a new 15½-year low of 284. Fletcher Building lost 31c to 705 and Contact Energy was off 20c to 870.
Mainfreight was down 25c to 680, Nuplex lost 14c early to 625, Ryman Healthcare was down 9c to 183, Sky City down 12c to 353, Hellaby Holdings down 21c to 191, and Fisher & Paykel Healthcare slid 11c to 305.
Shares losing 5c early included Infratil, down to 210, Pike River Coal down to 170, Rakon down to 270, Tourism Holdings down to 135 and The Warehouse down to 325.
Among stocks down 4c early were Auckland Airport, down to 196, Guinness Peat Group down to 123, and Tower to 206.
Dual-listed stocks ANZ Banking Group was down 44c to 1990, and Westpac fell 73c to 2740.
Grant Williamson, director at share broker Hamilton Hindin Greene, said there was not much panic but there was some selling from retail investors.
Williamson said the global credit crunch, which started in the so-called US subprime mortgage market more than a year ago, was going on and on.
“You’re talking some major corporations here in quite a bit of financial strife. I don’t think this generation has seen anything like this,” said Williamson.
“The 1987 crash on Wall Street was all over in a matter of a week or so and recovered from there. Whereas this decline that we’ve seen this year … has been a pretty aggressive sell-off.”
There were now concerns about giant insurer American International Group, which is receiving assistance from New York State.
“It just seems to be flowing from one [firm] to another because so many of these companies do have exposure to one another,” Williamson said.
In the United States Lehman Brothers, Wall Street’s fourth biggest investment bank, filed for bankruptcy protection late yesterday while its larger rival Merrill Lynch agreed to be taken over and the Federal Reserve threw a life line to the battered financial industry.
As a deepening crisis took new, bigger victims, the US Federal Reserve said for the first time it would accept stocks in exchange for cash loans and 10 of the world's top banks agreed to establish a US$70 billion emergency fund, with any one of them able to tap up to a third of that.
On Wall Street both the Dow Jones industrial average and Standard & Poor's 500 indexes fell by more than 4 per cent. The Nasdaq fell 3.31 per cent. In London the FTSE 100 index fell almost 4 per cent.
Tower equities fund manager Paul Robertshawe said part of the impact had hit New Zealand yesterday with the NZX50 falling 1.26 per cent.
"[But] it was worse in the rest of the world [overnight] so we'll have another bad day, or down day, today," Robertshawe said.
He said the recent government bailout of US mortgage giants Fannie Mae and Freddie Mac had been viewed in some quarters as the low point of the more than year old global credit crunch. Now some were speculating that Lehman's bankruptcy was.
"I just don't know," Robertshawe said. "You probably won't know it's the bottom until after you have seen it."
An "absurd" amount of money - hundreds of billions of dollars - had been used so far to rescue struggling global financial firms.
"It has just gone into recapitalising bad balance sheets," Robertshawe said. "The work out period could be quite long [so] to me calling the bottom seems fraught with danger really."
New Zealand did not have the US problems directly but was linked indirectly through our financial sector and big five banks, which are all Australian owned.
"We don't have the same extent of an issue but a global slowdown is not good for New Zealand markets, Robertshawe added.
ANZ National Bank economists, meanwhile, said markets remained volatile with "incredibily fickle" sentiment.
A silver lining locally could be an increasing change of another Reserve Bank interest rate cut next month. The central bank cut the official cash rate by half a per cent to 7.5 per cent last week.
"Considering it was credit and the global backdrop that appeared to spur them to this move in the first place," it seemed appropriate to expect another half per cent cut, the economists said.
Williamson expected the New Zealand sharemarket to be knocked lower again when Australian trading gears up but suggested there was the possibility of a “bit of a recovery” late in the day.
“I think Wall Street could very well see a bounce tonight. But it will depend on what news comes out about the financial stocks over there.”
Williamson added that the New Zealand sharemarket had “very solid fundamentals” and at some stage investors would be looking to bargain hunt.
On a black day for Wall Street, frantic attempts to find a rescuer for Lehman failed and Bank of America agreed to buy Merrill Lynch in an all-stock deal worth US$50 billion, seeking a bargain as the world's largest retail brokerage sought refuge from fears it could be the next victim.
The events signal a seismic shift in Wall Street's power structure with big name investment banks biting the dust and major banks like Bank of America and JPMorgan Chase becoming the survivors.
"It's a return to pure capitalism, the survival of the fittest -- the government can't and won't bail everybody out," said Justin Urquhart Stewart, investment director at 7 Investment Management in London.
"Investors will now retreat to the trustworthy banks, though that's not a phrase that trips off the tongue easily nowadays."
US shares had their worst day since markets reopened after the attacks of September 11, 2001.
The day followed one of Wall Street's most agonising weekends ever, which saw investment bank Lehman Brothers file for bankruptcy protection and Merrill Lynch forced to accept a takeover by Bank of America Corp. Concerns were also mounting about insurer AIG.
The benchmark Standard & Poor's 500 index fell 4.7 percent, to 1192.70, tumbling to its lowest close since October 2005.
The Dow Jones industrial average slid 504.48 points, or 4.4 percent, to 10,917.51, while the Nasdaq Composite Index dropped 3.6 percent, to 2179.91.
Yesterday the New Zealand sharemarket fell 1.2 percent, or 41.8 points, as investors watched the US troubles unfold.
In Australian shares fell 1.8 percent and Britain's benchmark share index ended almost 4 percent lower overnight (NZT).
KIWI DOLLAR HIT
Meanwhile the New Zealand dollar was shaken roughly overnight as equity markets in the United States and Europe fell sharply amid further turmoil in the global financial system.
US shares had their worst day in more than seven years as fears about the US financial system's stability escalated after investment bank Lehman Brothers filed for bankruptcy and insurer AIG struggled for survival.
Some initial support for the New Zealand dollar off the back of US dollar weakness saw the kiwi get to around US67.15c late yesterday evening.
But that reversed overnight and the NZ dollar dropped below US65.40c at one point, before recovering some ground to around US66c by 8am today.
In its morning update today, ANZ bank said the events of yesterday (NZT) had a massive impact on markets around the globe overnight.
Perceived safe-haven currencies, the US dollar and yen, were in demand, sending high yielding currencies such as the NZ and Australian dollars, the euro and sterling lower from late yesterday.
Bank of New Zealand currency strategist Danica Hampton said escalating risk aversion and concern that problems in the US financial sector will spill across into global issues were taking a toll on risk sensitive currencies, such as the kiwi against the yen.
Having managed to hold gains against the euro for most of the New York trading session, the greenback fell in the wake of US equities as they extended losses in late trading.
The yen also rallied on the unwinding of carry trades in which investors borrow low yielding currencies such as the yen to invest in higher yielding riskier assets such as the NZ dollar.
US markets turmoil hits NZX
Tuesday, 16 September 2008
Email a Friend | Printable View | Have Your Say
Reuters
LEHMAN COLLAPSE FALLOUT: While a global slowdown over the collapse of Lehman Brothers in the US won't be good for New Zealand markets, a silver lining could be an increasing chance of another Reserve Bank interest rate cut next month.
Related Links
Dow records biggest drop in 7 years
FTSE drops 3.9 percent after Lehman
Comment: We will survive
Wall Street collapse reverberates
Subscribe to Archivestuff
Have your say
Advertisement
AdvertisementLATEST: The New Zealand sharemarket plunged in the first few minutes after opening today, following a night of turmoil in the world financial system.
Around 10.20am the benchmark NZSX-50 index was down 76.32 points, or 2.3 percent, to 3243.58.
The pain continued for top stock Telecom, down 9c early to a new 15½-year low of 284. Fletcher Building lost 31c to 705 and Contact Energy was off 20c to 870.
Mainfreight was down 25c to 680, Nuplex lost 14c early to 625, Ryman Healthcare was down 9c to 183, Sky City down 12c to 353, Hellaby Holdings down 21c to 191, and Fisher & Paykel Healthcare slid 11c to 305.
Shares losing 5c early included Infratil, down to 210, Pike River Coal down to 170, Rakon down to 270, Tourism Holdings down to 135 and The Warehouse down to 325.
Among stocks down 4c early were Auckland Airport, down to 196, Guinness Peat Group down to 123, and Tower to 206.
Dual-listed stocks ANZ Banking Group was down 44c to 1990, and Westpac fell 73c to 2740.
Grant Williamson, director at share broker Hamilton Hindin Greene, said there was not much panic but there was some selling from retail investors.
Williamson said the global credit crunch, which started in the so-called US subprime mortgage market more than a year ago, was going on and on.
“You’re talking some major corporations here in quite a bit of financial strife. I don’t think this generation has seen anything like this,” said Williamson.
“The 1987 crash on Wall Street was all over in a matter of a week or so and recovered from there. Whereas this decline that we’ve seen this year … has been a pretty aggressive sell-off.”
There were now concerns about giant insurer American International Group, which is receiving assistance from New York State.
“It just seems to be flowing from one [firm] to another because so many of these companies do have exposure to one another,” Williamson said.
In the United States Lehman Brothers, Wall Street’s fourth biggest investment bank, filed for bankruptcy protection late yesterday while its larger rival Merrill Lynch agreed to be taken over and the Federal Reserve threw a life line to the battered financial industry.
As a deepening crisis took new, bigger victims, the US Federal Reserve said for the first time it would accept stocks in exchange for cash loans and 10 of the world's top banks agreed to establish a US$70 billion emergency fund, with any one of them able to tap up to a third of that.
On Wall Street both the Dow Jones industrial average and Standard & Poor's 500 indexes fell by more than 4 per cent. The Nasdaq fell 3.31 per cent. In London the FTSE 100 index fell almost 4 per cent.
Tower equities fund manager Paul Robertshawe said part of the impact had hit New Zealand yesterday with the NZX50 falling 1.26 per cent.
"[But] it was worse in the rest of the world [overnight] so we'll have another bad day, or down day, today," Robertshawe said.
He said the recent government bailout of US mortgage giants Fannie Mae and Freddie Mac had been viewed in some quarters as the low point of the more than year old global credit crunch. Now some were speculating that Lehman's bankruptcy was.
"I just don't know," Robertshawe said. "You probably won't know it's the bottom until after you have seen it."
An "absurd" amount of money - hundreds of billions of dollars - had been used so far to rescue struggling global financial firms.
"It has just gone into recapitalising bad balance sheets," Robertshawe said. "The work out period could be quite long [so] to me calling the bottom seems fraught with danger really."
New Zealand did not have the US problems directly but was linked indirectly through our financial sector and big five banks, which are all Australian owned.
"We don't have the same extent of an issue but a global slowdown is not good for New Zealand markets, Robertshawe added.
ANZ National Bank economists, meanwhile, said markets remained volatile with "incredibily fickle" sentiment.
A silver lining locally could be an increasing change of another Reserve Bank interest rate cut next month. The central bank cut the official cash rate by half a per cent to 7.5 per cent last week.
"Considering it was credit and the global backdrop that appeared to spur them to this move in the first place," it seemed appropriate to expect another half per cent cut, the economists said.
Williamson expected the New Zealand sharemarket to be knocked lower again when Australian trading gears up but suggested there was the possibility of a “bit of a recovery” late in the day.
“I think Wall Street could very well see a bounce tonight. But it will depend on what news comes out about the financial stocks over there.”
Williamson added that the New Zealand sharemarket had “very solid fundamentals” and at some stage investors would be looking to bargain hunt.
On a black day for Wall Street, frantic attempts to find a rescuer for Lehman failed and Bank of America agreed to buy Merrill Lynch in an all-stock deal worth US$50 billion, seeking a bargain as the world's largest retail brokerage sought refuge from fears it could be the next victim.
The events signal a seismic shift in Wall Street's power structure with big name investment banks biting the dust and major banks like Bank of America and JPMorgan Chase becoming the survivors.
"It's a return to pure capitalism, the survival of the fittest -- the government can't and won't bail everybody out," said Justin Urquhart Stewart, investment director at 7 Investment Management in London.
"Investors will now retreat to the trustworthy banks, though that's not a phrase that trips off the tongue easily nowadays."
US shares had their worst day since markets reopened after the attacks of September 11, 2001.
The day followed one of Wall Street's most agonising weekends ever, which saw investment bank Lehman Brothers file for bankruptcy protection and Merrill Lynch forced to accept a takeover by Bank of America Corp. Concerns were also mounting about insurer AIG.
The benchmark Standard & Poor's 500 index fell 4.7 percent, to 1192.70, tumbling to its lowest close since October 2005.
The Dow Jones industrial average slid 504.48 points, or 4.4 percent, to 10,917.51, while the Nasdaq Composite Index dropped 3.6 percent, to 2179.91.
Yesterday the New Zealand sharemarket fell 1.2 percent, or 41.8 points, as investors watched the US troubles unfold.
In Australian shares fell 1.8 percent and Britain's benchmark share index ended almost 4 percent lower overnight (NZT).
KIWI DOLLAR HIT
Meanwhile the New Zealand dollar was shaken roughly overnight as equity markets in the United States and Europe fell sharply amid further turmoil in the global financial system.
US shares had their worst day in more than seven years as fears about the US financial system's stability escalated after investment bank Lehman Brothers filed for bankruptcy and insurer AIG struggled for survival.
Some initial support for the New Zealand dollar off the back of US dollar weakness saw the kiwi get to around US67.15c late yesterday evening.
But that reversed overnight and the NZ dollar dropped below US65.40c at one point, before recovering some ground to around US66c by 8am today.
In its morning update today, ANZ bank said the events of yesterday (NZT) had a massive impact on markets around the globe overnight.
Perceived safe-haven currencies, the US dollar and yen, were in demand, sending high yielding currencies such as the NZ and Australian dollars, the euro and sterling lower from late yesterday.
Bank of New Zealand currency strategist Danica Hampton said escalating risk aversion and concern that problems in the US financial sector will spill across into global issues were taking a toll on risk sensitive currencies, such as the kiwi against the yen.
Having managed to hold gains against the euro for most of the New York trading session, the greenback fell in the wake of US equities as they extended losses in late trading.
The yen also rallied on the unwinding of carry trades in which investors borrow low yielding currencies such as the yen to invest in higher yielding riskier assets such as the NZ dollar.