NZX rebounds as Wall St pins hopes on moves to cushion the coronavirus impact

Tuesday, 3 March 2020

Sharemarkets throughout Asia have also been spooked by coronavirus fears.

A strong rally on Wall St has seen the New Zealand sharemarket shoot up 3.5 per cent, breaking a six-day string of losses.

Stocks rose sharply on Wall Street overnight, with the Dow Jones Industrial Average surging more than 5 per cent, and US central bankers in discussion over a possible fiscal lifeline to cushion the impact of the coronavirus.

Wall St suffered its worse week since 2008 last week as investors panicked about the pace of Covid-19's spread outside China.

Jeremy Sullivan, investment adviser at Hamilton Hindin Greene, said the rally in the US had given New Zealand 'a very positive cue'.

The NZX has fallen for six days straight.

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The NZX opened up 1.7 per cent per cent, and by 10.55am, it had clawed back 5 per cent from the previous day, jumping 3.55 per cent to 11497.56.

Investors globally are increasingly hoping for interest rate cuts or other monetary policy moves to help shield economies from the worst effects of the outbreak.

``Investors have convinced themselves that global central banks will likely be even more accomodative in order to short-circuit any psychological damage, ' Sam Stovall, chief investment strategist at CFRA, said.

The NZX has been down more than 1 per cent every day bar one since February 25.

But Sullivan said investors appeared to have taken heart from the possibility of further interest cuts.

'Obviously, lower interest rates lowers the cost of borrowing for companies, means that they are more profitable, the more profitable they are, the higher the share prices go.'

However, he did not think investors were out of the woods yet.

'I would expect the volatility to remain. This epidemic has very real potential to turn into a pandemic and there are going to be some wide-ranging implications for a number of businesses.'

He expected many Kiwi businesses would be formulating pandemic plans and trying to find logistic and supply chain alternatives.

Some less infected parts of China could be soon told to return to work, which could alleviate the disruption, he said.

Additional reporting from AP