Share market stages partial recovery as economists advise investors not to panic

Tuesday, 6 August 2024

Share markets appear to have stabilised after a slide on Tuesday morning that followed anxiety over the trajectory of the United States economy.

The NZX opened 1% lower on Tuesday morning after US markets took a further battering overnight on Monday, but clawed back most of those losses later in the day.

Finance Minister Nicola Willis said she always kept an eye on the markets because New Zealand was “so reliant on our trading partners”.

“Markets do go up and down, and so we do need to expect that that will happen, but it is something I'll keep a close watch on.”

Many financial commentators in the US have been cautioning retail investors not to panic, suggesting the recent market wobble may mostly be a case of an overheated market letting off steam.

The US Dow Jones index closed just over 1000 points or 2.6% lower on Tuesday morning, New Zealand time, while the tech-rich Nasdaq index was down 3.4%.

But futures trading suggested they might stage some sort of recovery on Wednesday.

The NZX top 50 index fell 1.5% on Monday in response to earlier jitters, which appeared to be sparked by a surprise rise in US unemployment reported by the US Department of Labor late last week.

Economists suggested that while recent data was some cause for anxiety, a recession in the United States still looked unlikely.

The Reserve Bank of Australia decided to keep its cash rate on hold at 4.35%, as expected, on Tuesday afternoon.

The bank said there was a high level of uncertainty about the overseas outlook.

“The outlook for the Chinese economy has softened and this has been reflected in commodity prices. Some central banks have eased policy, although they remain alert to the risk of persistent inflation,” it said.

“Globally, financial markets have been volatile of late and the Australian dollar has depreciated. Geopolitical uncertainties remain elevated, which may have implications for supply chains.”