NZX up and down as virus fear spreads

New Zealand’s sharemarket rallied with the opening of the Australian market amid global concerns about the coronavirus.

The NZX top 50 index initially fell 1.98 per cent yesterday morning, after closing up 1.18 per cent on Tuesday, a slight recovery from deeper falls during the day.

But at midday yesterday, the market had recovered some of its earlier losses, to be 1.06 per cent down on the previous day’s trading. Wall St’s main indices plunged 3 per cent overnight after officials warned the spread of the virus to the United States seemed inevitable. As the highly contagious virus becomes more established in the West, the S&P500 fell almost 3 per cent, following a 3.4 per cent tumble on Monday night, its biggest one-day drop in two years.

Most other European and Asian markets also felt some pain. Germany’s DAX and Britain’s FTSE 100 declined nearly

2 per cent and Japan’s Nikkei 225 index tumbled more than 3.3 per cent. Stocks in New Zealand and Australian were also hammered.

Australia’s SPI-200 futures contract closed down 2.24 per cent, extending a similar fall on Monday. Liz Kendall, a senior economist at the ANZ Bank, said the declines were an understandable response to what was now known about the coronavirus.

‘‘The reaction that we have seen in terms of global equity markets really reflects the fact that we are now in a world where the spread has moved outside China and the global implications could be a lot more significant.’’

Here, Kendall said, the Reserve Bank was still expecting the year’s soft start to improve and was holding interest rates steady but ‘‘clearly the situation is evolving really, really rapidly’’.

However, ‘‘the nature of the shock is a little unusual’’ and interest rate cuts might not be as useful as a ‘‘fiscal response’’, such as government business relief.

As for the New Zealand dollar, it was still strong at US63c but Kendall said it could well drop.

Sharemarkets were chilled by news that coronavirus numbers were growing in South Korea, Iran, Japan and Italy.