Wall St calm eases market panic

Fears of a second wave of selling across the London stock market failed to materialise this afternoon.

Some market watchers had worried that a fresh fall by the New York markets could prompt further tumbles in London, where the FTSE-100 Index fell as much as 263 points this morning. But the key US markets indicator, the Dow Jones Industrial Average, opened smartly higher, up 120 points at 10425 just before 3pm.

The gain helped the FTSE 100 recover slightly to stand down 186.4 points at 5991.7, although the drop still represented around £38 billion wiped from the value of leading companies.

Technology shares had led the early falls but even America's technology-dominated Nasdaq pulled modestly ahead this afternoon, causing a sigh of relief from technology investors in London. Many tech shares which had plunged this morning were still down this afternoon although the losses were less severe.

Prices had fallen on markets across the world as traders reacted to the selling in New York that slashed nearly $2 trillion from the stock market's value at the end of last week.

It had been widely anticipated that trading would be uncertain today with investors testing the market to see if it had reached a bottom and could begin to recover.

The Dow fell 617.78 points, or by 5.7 per cent on Friday, its biggest one-day point drop ever. It closed at 10,305.77.

The Nasdaq, home to technology stocks whose popularity has evaporated, tumbled 355.9 on Friday, or by 9.7 per cent, to 3,321.29. The point drop was its worst ever, surpassing a fall of 349.15 on March 3, and it was the second worst in percentage terms. Its 25 per cent plunge for all of last week also was a record.

Germany's DAX blue-chip index also fell 4.3 per cent but then recovered some lost ground and was down 2.5 percent at late morning. In Paris, the CAC 40 index of leading shares was 2.4 per cent below Friday's close.

"Its less painful than you might have expected, given the rout on Wall Street last Friday," said Paul Horne, a European equity markets economist at Salomon Smith Barney in London.

In Asia, Japan's benchmark 225-issue Nikkei Stock Average fell nearly 9 per cent before closing with a loss of 1,426.04 points, or 6.98 per cent, at 19,008.64. It was the fifth-largest percentage drop in the Nikkei's history.

"It's going straight down in line with the movement in New York," said Sachio Ishikawa, a general manager at Chuo Securities in Tokyo. "I expected the market to fall, but I didn't think it would fall quite this much."

After the Tokyo close, ruling coalition policy chiefs agreed to recommend pumping up to 1 trillion yen, or $9.7 billion, in public funds into the stock market if it continues to plunge.

In Hong Kong, the Hang Seng Index finished with its second-worst one-day point loss in history, falling 8.55 percent, to 14,762.37. In Singapore, the Straits Times Index closed 8.69 percent lower at 1,999.39.

Compared to their Asian counterparts, investors in Europe appeared to be somewhat less fearful that Wall Street's bull market might finally have expired.