NZ market rally continues

By DAVID GADD, DAVID HARGREAVES & AARON LIM - BusinessDay.co.nz | Wednesday, 01 October 2008

The New Zealand sharemarket reversed yesterday’s losses, rising 3 per cent by early afternoon. Global markets will continue to watch the events on Capitol Hill closely, with the US Senate agreeing to schedule another bailout vote on Wednesday night in Washington.

The vote on the bailout in Washington will include the proposal to increase the amount of bank deposits insured by the FDIC to $US250,000 from $US100,000, a Senate aide said overnight.

Senate Majority Leader Harry Reid, a Nevada Democrat, received unanimous consent from the Senate on Tuesday to schedule the vote on the package the White House says is needed to avoid a broad economic downturn.

The benchmark NZX 50 rose 100 points, or 3.14 per cent to 3190 by early afternoon, reversing yesterday's losses.

Leading blue chip Telecom was at $2.86 in early afternoon, up 13c while Fletcher Building gained 50c to $7.15.

Contact Energy was up 23c to $8.05, while ANZ bank added 67c $22.90. Westpac rose 35c to $27.50

Fisher and Paykel Healthcare was up 12c to $3.05, with F&P Appliances adding 7c to $1.67. Technology stock Rakon was up 12c to $2.320

In Australia, the S&P/ASX 200 jumped over 3 per cent within minutes of opening, with the benchmark index adding 163 points to 4764. In a repeat of yesterday, the ASX staggered the trading of stocks by alphabetical order.

The Japanese stockmarket rose 1.2 per cent early in the session, with the Nikkei avergae gaining 153 points to 11,412.

Meanwhile, Reserve Bank Governor Alan Bollard has ruled out an emergency cut to New Zealand's interest rate.

Tower portfolio manager Paul Robertshawe said that from the New Zealand perspective, "there's no point panicking if you think in three days' time you are going to have to reassess the situation when it is a bit more positive".

Bollard, says there has never been the degree of financial turbulence being experienced around the world before.

He told Radio New Zealand's Morning Report the Reserve Bank is keeping a close eye on the banking system in New Zealand.

He says the Reserve Bank is trying to judge the short-term effects of the crisis, and says it's not something that would necessarily affect the official cash rate.

Dr Bollard says the Reserve Bank is in a holding pattern waiting for the United States Congress to pass some sort of bailout package and restore confidence to the markets.

Wall St clawed its way back overnight from yesterday's worst slide in more than 20 years, as investors bet that Washington would still pass a plan to stabilize the U.S. financial sector despite Monday's defeat.

Yesterday the NZX, the first market to open after news that the US$700 billion bail out had not passed, plunged 148 points within the first 30 min of trading, taking it down more than 4%. But  the NZX 50 index stabilised and finished the day at 3090.216, down 98.322 points.

Despite the benchmark index falling 3 per cent, it was on light trading volumes of $121,658,077. Among leading stocks Telecom fell 5c to $2.730 Fletcher Building was $6.650, down 26c, and Contact Energy was $7.820 down 47c.

Commentators saw this as a relatively restrained reaction in the New Zealand market when compared with the bloodletting on global markets. However, all eyes have been nervously watching Wall St overnight and if it had continued its drops, then expectation was that the NZX would lose confidence and begin to fall steeply itself.

Tower's Robertshawe cautioned that while there may be some relief once a bailout is approved, the global outlook was not good.