Wellington, Jan 22 NZPA - An 8 percent rise in Nuplex stocks, following a profit upgrade after the market closed yesterday, could not prevent the New Zealand sharemarket tumbling in early trading, in the wake of falling share prices in the United States and Europe.

Share prices had dropped sharply overseas as US President Barack Obama took a tough stance on financial institutions, proposing rules to make the system safer by preventing the biggest banks from taking excessive risks.

He said he was ready to fight the financial sector and its lobbyists for rules that would bar banks from owning, sponsoring or investing in hedge funds or private equity funds for their own profit, causing a bank share sell-off.

Europe's stock markets, closing just as the announcement was made, fell in concert with already weak US stocks after a surprise increase in US weekly jobless claims reduced optimism about economic recovery from the global financial crisis.

In this country, the benchmark NZX-50 index was down 16.54 points, or half a percent, to 3208.75 around 10.15am.

The index has fallen on eight of the past nine trading days, although the declines yesterday and Wednesday were only small. It is now more than 100 points below the 15-month closing high around 3310 of January 8.

Bucking the decline Nuplex shares were up 24c to 329, after the industrial resins maker yesterday increased the guidance for its annual result for the second time in just over a month.

The wider picture was gloomy with Fletcher Building down 14c to 801, Hallenstein Glasson down 5c to 330, NZX down 5c to 223, Sky City down 4c to 331, and Pumpkin Patch down 3c to 202.

Stocks down 2c included Fisher & Paykel Healthcare to 333, Freightways to 335, NZ Oil & Gas to 161, Pike River Coal to 103, Ryman Healthcare to 208, Auckland Airport to 187, ING Medical Properties to 116, Property for Industry to 113. and Restaurant Brands to 175.

In the US preliminary data showed the Dow Jones industrial average fell 2 percent to close at 10,389.88, the Standard & Poor's 500 Index lost 1.9 percent to 1116.47, and the Nasdaq Composite Index gave up 1.1 percent to 2265.70. Earlier, the pan European FTSEurofirst 300 fell 1.6 percent.