New Zealand shares have dropped as US markets enter correction territory, where stocks fall more than 10 per cent from a peak, as the prospect of higher interest rates prompts investors to rethink their strategies.
The S/NZX50 fell 121.9 points, or 1.5 per cent, to 8055.24 as at 10.30am on Friday morning, on turnover of $39 million.
New Zealand's market is the first to open in the world, and follows a lower close on Wall Street, with the Dow Jones Industrial Average down 4.2 per cent and the Nasdaq 100 dropping 4.2 per cent.
Volatility returned to skittish financial markets as investors reassess valuations as they adjust their expectations for the pace of inflation and interest rate increases by the Federal Reserve, with the Volatility Index, known as Wall Street's 'fear gauge' at 33.46. US markets plunged on Friday but recovered some of those losses earlier in the week.
The local bourse dropped 2.1 per cent on Monday but seemed to have calmed by Wednesday as global markets rallied.
Craigs Investment Partners' Peter McIntyre says the gains earlier this week looked like "a bit of a dead cat bounce" and the volatility in global markets is likely to stay for a while.
"It's not a credit crisis, it's part of the process towards normalisation of more neutral interest rates when we've had a prolonged period of low interest rates which had to inevitably change at some stage.
"You're seeing a lot of investors look to profit-take while there is still significant profits there, and you've got to remember we're only really going back to December 2017 with regards to where the market is. While it seems significant it's really just taking the top off January and most of those December gains."