The Dow Jones in New York dragged back major losses from early last week during Thursday and Friday trading, prompted by the US Government proposing a $US700 billion ($NZ1060 billion) rescue plan to buy mortgage-related bad debts to be managed under a single portfolio.
However, while calming the panicked markets at the time, all world bourses are now holding their breaths to gauge investor reaction when the Dow Jones, tech Nasdaq Composite and Standard & Poors 500 fare resume trading in New York today (Monday New York time).
The NZX opened positively yesterday, with the SE50 index gaining about 2.5% or 81 points on opening and closed up 2.15% for the day, or 68.59 points on the SE50 at 3255.72, but on light volumes worth a total $92 million during the day.
ABN Amro Craigs broker Chris Timms said all five major Asian bourses closed up for the day, with the Singapore Straits recording the smallest rise of 0.5% and the Shanghai Composite the largest increase at 6.5%.
"We [NZX] are very much a follower now. Everyone will be watching overnight what is happening with the Dow Jones," Mr Timms said.
The ASX All Ords index closed up 4.6% yesterday, mainly on the back of good gains in the finance and resource sectors which were hardest hit last week, he said.
Mr Timms said worldwide bourse regulators had now turned their attention to the share "shorting" and stepped in to investigate, or temporarily ban the practice, whose massive profits are only made with falling company share prices, including major stocks on Wall Street.
On Friday, the Australian Securities and Investments Commission (ASIC) moved in line with regulators from United States, United Kingdom, France, Germany, Switzerland, Ireland, the Netherlands and Canada to ban covered short sales in financial stocks to curb some of the market volatility.
The shorting of shares is a legal strategy where the shares are borrowed from a sharebroker for a small fee, and then sold in the hopes of buying them back cheaper later and pocketing the difference, after having returned the borrowed shares.
Shorting relies on company share prices going down.
An investigation is under way in New York by its attorney-general into allegations some traders may have used illegal tactics to drive down share prices in which they held "short positions".
In Australia, shorting has been partly blamed for the recent sharp falls of stocks such as Macquarie Group.
In the US, companies have been unable to recover from share price plunges and some have been ruined as the share plunge becomes a self-fulfilling prophecy and investors flee the stock.
Mr Timms said it was not clear whether existing short positions in Australia would have to be covered, which could prompt widespread buying of shares, to replace those borrowed.
"This buying could in itself give the market a real shunt," Mr Timms said.
