Analysis: Trading was halted for short periods of time in Japan and South Korea overnight, NZ time, as circuit breakers designed to prevent panic selling were triggered multiple times.
The New Zealand market opened at 10am – the first in the world to step cautiously into the new day.
For now, Kiwi investors seem to be breathing deeply and holding off any hasty decisions. The NZX 50 was down just 189 points (1.5 percent) yesterday, and opened down another 120 points (1 percent) this morning. They are watching for this afternoon’s interest rates decision from Australia’s Reserve Bank, and tomorrow’s Stats NZ update on how the local jobs market fared over the June quarter.
But overnight, Japan’s Nikkei 225 had plunged 12.4 percent – the biggest one-day drop since Black Monday in 1987. “That was a crash. It smelled like 1987,” Neil Newman, head of strategy at Astris Advisory in Tokyo, told CNN.
Investors point to the Bank of Japan’s move last week to raise its main interest rate from nearly zero. Such a move helps boost the value of the Japanese yen, but it could also force traders to scramble out of deals where they borrowed money for virtually no cost in Japan and invested it elsewhere around the world.
The more worrying picture may be in tech stocks: Semiconductor shares plunged with Tokyo Electron nosediving 26 percent and Advantest tumbling 16 percent.
AP reports the overnight drops in Asia and Europe were the latest in a global sell-off that began last week, and were accelerated by US job data on Friday that sparked fears of recession in the US.
Last month, the Washington Post reported that Wall Street analysts and tech investors were sounding the alarm that the immense amount of money being poured into artificial intelligence could be leading to a financial bubble.
“Despite its expensive price tag, the technology is nowhere near where it needs to be in order to be useful,” Jim Covello, Goldman Sachs’s most senior stock analyst and a 30-year veteran of covering tech companies, says. “Overbuilding things the world doesn’t have use for, or is not ready for, typically ends badly.”
The concentration of investment in the six largest US tech stocks – Nvidia, Apple, Microsoft, Amazon, Microsoft and Meta – had developed into a risk, analysts say. Intel was down 26 percent overnight, Apple was down 5 percent, and shares in AI darling Nvidia fell as much as 15 percent, before closing down 6 percent.
Imre Speizer, Westpac NZ’s head of strategy, says the turmoil in global markets has continued, though bond yields and the US dollar have rebounded ahead of the closing of Wall Street, in the US. The S&P500 is down 3.0 percent, and the Dow Jones Industrial Average down 2.6 percent.
Greg Smith, head of retail at Devon Funds, tells RNZ that New Zealand’s stock market is insulated to a degree because there are fewer technology stocks and the market has lagged recently, anyway. “But we are not immune to concerns over a downturn in the world’s largest economy.”
