The New Zealand sharemarket fared the best of global indices yesterday as new home sales data in the United States heightened worries about a worldwide economic recovery.
At 5pm, the NZX-50 closed down only seven points, or 0.2%, but at the same time, indices in Australia, Japan, Korea, Hong Kong and other parts of Asia were down 2.5% or more.
The day started badly when the Dow Jones Industrial Average closed down 1.2%, the Standard & Poor's 500 was down 2% and the Nasdaq was off 2.7%.
The US stocks tumbled in a broad sell-off after weak data on new-home sales increased concerns about the pace of the economic recovery.
Sales of newly-built single-family homes unexpectedly fell 3.6% last month, according to a US Commerce Department report.
Separately, data from the Mortgage Bankers Association showed demand for mortgages had fallen for the past three weeks.
Craigs Investment Partners broker Chris Timms said the Dow would set the tone for world markets when it closed today.
"I seem to have said this two or three years ago, but at the moment we wait and see what the Dow does and what the reaction is from US investors. That will determine where sharemarkets go in the short term."
In Australia, resource stocks were hard hit, with Rio Tinto shares down 4% and BHP down more than 3%.
Banking stocks also fell by up to 2.5% as overseas investors, who had been buying Australian currency, sold their banking shares to take their money home, he said.
Large funds, which could manipulate the market through sheer size, were also selling their positions around the world.
"We haven't had the same level of aggressive upward movements that markets overseas [have] so we have been more robust.
"Fear and greed have re-entered the market place. If fear sets in, the fundamentals of companies goes out the window and investors are like sheep heading for the gate."
The New Zealand currency slid during the day in reaction to a rise in the US currency which reached a two-week high against a basket of world currencies.
The fall in US stocks boosted the safe-haven appeal of the US and Japanese currencies.
Both the Australian and New Zealand dollars were victims of the fall, with the Australian dollar faring the worst, falling 3.1% against the yen in early trading.
However, later in the day the kiwi fell 3.7% against the US dollar to trade at US71.7c at 5pm. Traders said the New Zealand currency fell in reaction to the Reserve Bank's decision to hold the official cash rate at 2.5%.
