Investors on the NZX have been hit hard this morning, with companies including Spark, Fletcher and Xero seeing their stock values plummet in the wake of 'Black Monday'.
Overnight, shares on the Shanghai Composite Index fell 8.5 percent, sparking sell-offs around the world.
Brokers here were steeling themselves for another bad day. The NZX 50 dropped 2.6 percent in the first half-hour of trading. Yesterday it shed 2.5 percent, wiping out $2.25 billion.
As of 12pm, it had recovered slightly to be only 2.2 percent down on its opening value of 5614 – still wiping off around about $2 billion.
Spark dropped 2.5 percent, Fletcher Building 3.2 percent and Xero 5.4 percent – the latter already down 8.1 percent yesterday.
The kiwi dollar has also tumbled to a six-year low, trading at 64.1 US cents. It briefly crashed to 62.4c overnight – its lowest mark since 2009 – before recovering.
Finance Minister Bill English has admitted the economic slowdown is putting the Government's predicted surplus at risk, but says a recession "doesn't look likely".
Prime Minister John Key is also downplaying the risk.
"The general consensus view from economists is that the probability of recession might have gone up a little bit, but from very low levels," he said.
"But overall, the likelihood is we'll grow, but grow at slower rates than we would have been anticipating."
Labour leader Andrew Little says the Government has "talked down the serious economic headwinds that we're facing".
"I think we do need to have an honest appraisal and good information about what exactly is happening."
Economists say if markets remain depressed, it's likely to keep interest rates lower for longer.
In the US, the Dow Jones plunged more than 800 points in the first two minutes, and a few minutes later was down more than 1000. Around midday Apple chief executive Tim Cook said he still had confidence in the Chinese market, which helped the market recover somewhat, but the sell-off resumed after lunch.
"I've never seen the Dow down 1000 points in one move," said one trader. "That was an extraordinary thing to watch happen."
The Dow ended the day down 3.58 percent, the S&P down 3.94 percent and the tech-heavy NASDAQ, 3.82 percent.
Greek markets shed 10 percent, Bombay 6 percent and Sao Paulo 3 percent.
The Shanghai Composite Index has fallen more than 37 percent since June. Investors now fear the Chinese government hasn't been open about the second-largest economy's true strength.
"Part of the real issue here is we don't generally feel like we know what's going on in China on a good day, and this isn't a good day," says Manhattan Venture Partners chief economist Max Wolff.
He says right now the US market is "overreacting", but only because it has "underreacted for 18 months".
3 News / CBS