Global sharemarkets appear set for more volatility today after booking losses across the Asia and Pacific region yesterday.
The expectations of a shaky start came from the early-opening New York futures markets last night.
Yesterday, the Australian and Asian sharemarkets all closed down, with the ASX shedding $A27 billion ($NZ33.5 billion) in companies' values within minutes, but the markets then made inroads into retracing some of the days' losses.
Craigs Investment Partners broker Peter McIntyre at 4pm yesterday said the early-opening New York futures markets appeared set to begin trading about 2.5% down, before the main US markets opened.
Mr McIntyre said some of the retracing on the ASX, NZX and Asian markets was due to "bargain hunters" picking up oversold stock, noting that just two New Zealand stocks; Skellerup and Restaurant Brands, made gains yesterday.
After the NZX opened it initially shed 3% and took a more than $500 million hammering in company values within 30 minutes, then steadied and ended the day at 5pm down 2.77%.
A global flight from currencies saw spot gold prices slingshot to a new high of $US1701 ($NZ2051) an ounce in New York, which was reflected in the New Zealand dollar being sold off by almost US1.5c from US84.25 to US82.76 yesterday.
Last week, the ASX alone lost $A100 billion in value but the global bourse-battering appeared to be easing a little yesterday.
Although the ASX clawed back more than half its losses by the time the NZX closed, the Asian markets in Shanghai, Tokyo, Singapore, Korea and Hong Kong were all down 3.7%-5% within a few hours of closing.
Friday's 4.2% decline of the S&P/ASX 200 Index was its biggest weekly retreat since November 2008, mirroring the week's US losses at the time with the Standard and Poor's 500 Index down 7.2%, and the Dow Jones Industrial Average down 5.8% for the week.
After an hour the NZX was 3.2% down, initially led by Auckland International Airport down 1.7%, Fletcher Building down 2.7%, Infratil down 3.4%, Contact Energy down 2.1% and Telecom down 1.7%; all of which posted larger declines by the end of the day.
Analysts are predicting months of continued volatility ahead with possibly years of recovery required with below average growth in gross domestic product (GDP) for many countries.
Attention is now returning to Europe's third and fourth largest economies, Spain and Italy, where the prospect of them defaulting was capturing investor attention.
Craigs Investment Partners head of private wealth research, Cam Watson said, "This volatility may continue for some months as [investor] sentiment swings between 'risk on' and 'risk off"'.
Global markets lost an estimated $US3 trillion-$US4 trillion last week after a double-routing when investors got spooked by the US economic outlook after raising its debt ceiling; further compounded by S&P's credit downgrade of the US from its coveted AAA rating to AA+, on negative watch.
Mr Watson said the declining value in the New Zealand dollar last week had helped soften the fall in global stocks for local investors and was recommending investors now considered defensive blue chip companies, or picked up other blue chip stock which may have been oversold recently.
"Inflation is a major risk for investors ... and growth assets, [shares] while clearly volatile in the short term, provide much needed protection against inflation," he said.
Mr Watson believes the financial crisis will be contained, but at a cost of lower consumer spending and economic activity; prompting below average gross domestic product (GDP) "for a number of years".
"The current problems are not a new crisis, but rather a hangover of the original 2008 global financial crisis. Debt eventually must be repaid," he said yesterday.
While S&P's US downgrade "may not be completely justified", it would not have an "excessively negative impact on markets" and would serve as a "wake-up call for dithering politicians" who may be underestimating the true scale of their governments' debt predicament, he said.
On the outlook for Spain and Italy, Mr Watson said their situation on possibly defaulting was "much more serious and would be extremely hard to contain".
Global stock markets
May to Aug 5
Australia - down 17%
United Kingdom - down 14%
United States - down 12%
New Zealand - down 8%
