The New Zealand stock market took a slight tumble yesterday in the wake of United States markets posting their worst decline in a month amid negative company forecasts and larger-than-expected job losses.
In the US, the Dow Jones industrial average slipped, to close down 2.72%, the S&P 500 Index fell 3%, and the tech-heavy Nasdaq was down 3.23%.
In New Zealand, the NZX opened weakly and immediately slipped back, but gradually retraced most of its losses and at the 5pm closing was down 0.24%, but on light turnover of 25.3 million shares worth about $48.3 million.
ASB chief economist Nick Tuffley painted a bleak picture for economies in the year ahead, which will set the tone of markets, with the next six months critical for the US, with mounting job loses and a downturn in retailing heading the slew of negative data.
"The United States' run of exuberance has been brought to a halt, largely by company downgrades. It shouldn't be a surprise, but it has put a sour note on the markets," Mr Tuffley said.
While Europe, Japan and New Zealand are in recession, having had two consecutive quarters of negative growth each, Mr Tuffley said the US was not technically in recession.
However, its National Bureau of Economic Research has applied its own criteria and decided the US had been in recession since late 2007, he said.
Also affected by the bleak outlook yesterday was the US dollar, which was down against other major currencies, the pound, euro and yen.
The New Zealand dollar gained only slight ground on the Australian dollar, losing more than 1c against the US dollar, closing at US58.54c at 5pm.
The US tumble followed reports pending home sales had fallen to the lowest level on record, factory orders were continuing to decline, analysts' predictions of 540,000 filings for unemployment in December and unemployment rising to 7%, AP reported from New York.
In response yesterday, stocks on the NZX took early hits immediately on opening, with leading stocks Fletcher Building down 14c to $5.75, Contact Energy down 10c to $7.40 and Telecom 2c down at $2.33, with the latter two retracing their losses later in the day.
ABN Amro Craigs broker Charles Abraham said bank shares were most affected yesterday, driven down by shareholder "uncertainty and negative sentiment" on whether they have disclosed all the "bad news" about asset write-downs.
The ANZ was down 50c, or 2.66% at $18.30 while Westpac was down 80c, or 3.85% at $20.
Mr Abraham said because of the relatively new International Financial Reporting Standards procedure, companies would have write-off assets which were depreciating because of either the credit crunch or recession, prompting bleak financial reports.
"It remains to be seen whether shareholders can focus on cash-flows, instead of looking at the write-offs," he said.
Mr Tuffley said New Zealand was likely to stay in recession for the first two quarters of 2009, and whether that bottoms out, or worsens, depends on global demand.
He noted China's growth at 9% was expected, by analysts' consensus, to fall to 8%.
However, Mr Tuffley believed that would be revised down further later in the year.
"With China and Asia providing the large share of consumer goods they will be feeling the ripple effect [of global recession] with a slowing of export demand," he said.
Gross domestic product in the US had a "sharp contraction" for the quarter to December, setting the scene for an annualised 4% decline in GDP during 2009, reflecting a "big hit" for the US economy overall, Mr Tuffley said.
