Global markets remain in turmoil
By CAROLINE ALPHONSO
Thursday, September 13, 2001
Global financial markets were in turmoil again Wednesday as investors struggled to find firm ground in the aftermath of the catastrophic destruction of the World Trade Center.
Asian stocks, already battling an economic slowdown, tanked Wednesday despite several rally attempts. European markets dropped off early in the day, but regained their footing by the close. Most of the Latin American markets that were open Wednesday made partial recoveries from Tuesday's panic selloff.
"Markets are run by fear and greed, and we're definitely in the fear zone," said Michael Manford, chief market strategist at Canaccord Capital Corp.
Trading was halted on a devastated Wall Street for a second day Wednesday. However, U.S. stock markets will open no later than Monday and perhaps as early as Friday, New York Stock Exchange chairman Richard Grasso said Wednesday.
The Toronto Stock Exchange, which was shut down Wednesday and most of the day Tuesday, will be up and running Thursday.
Meanwhile, most stock markets elsewhere in the world were volatile.
In Japan, Asia's largest market, the benchmark Nikkei stock average of 225 major Tokyo stocks plunged 6.6 per cent to a new low, closing at 9,610.10 points, while Hong Kong's blue-chip Hang Seng index fell almost 9 per cent to close at 9,493.62.
European markets, however, rebounded after a day of see-sawing, supported by hopes that the central banks will provide sufficient funds to keep payment systems flowing and markets operating.
The blue-chip FTSE 100 index climbed 2.9 per cent, closing the day at 4,882.10. The index had fallen 5.7 per cent the previous day. The German DAX index closed at 4,335.20 Wednesday, up 1.4 per cent or 61.67 points.
The Stoxx Nordic index closed up 4.8 per cent - outperforming the FTSE - powered by Nokia Corp. and Telefonaktiebolaget LM Ericsson on aggressive buying domestically and from overseas institutions. One analyst said the telecommunications equipment heavyweights became unlikely beneficiaries based partly on expectations that a lot of equipment in the United States will need to be replaced.
Brazil's benchmark Bovespa stock index bounced 3.8 per cent by lunchtime Wednesday to recover part of the 9.2 per cent it lost in 75 minutes on Tuesday before trading was halted to stop the freefall. It closed at 11,113.50 points, up 2.64 per cent. The region's other big stock markets, in Argentina and Mexico, opted to remain closed Wednesday along with U.S. markets.
Even with the gains in Europe and a few other markets, Philip Shaw, chief economist at Investec Bank in London, said there won't be any firm direction until U.S. markets resume trading. "The
markets are very confused by which way to turn," he said. "It has been a bit of a yo-yo session."
All eyes are now on the world's central banks, which came together Wednesday to pledge global stability. Also, the U.S. Federal Reserve has urged the banks to limit dollar trading to avoid exacerbating financial market turmoil.
Analysts said the markets in the United States will likely be volatile when they reopen, and there may be a huge selloff.
While most are not optimistic of a recovery in the markets until some time next year, some analysts, such as Mr. Manford of Canaccord, said Tuesday's disastrous event may trigger the bottom investors have been longing for.
He is optimistic the U.S. market will gain some ground in the weeks following the reopening of the exchanges. "Once we begin to see how much resilience there is in the U.S. economy and how much resolve there is in U.S. people, especially New Yorkers, we're going to have this economy back in some semblance of order in a couple of weeks," Mr. Manford said.
However, BMO Nesbitt Burns Inc. chief economist Sherry Cooper said the terrorist attacks may push the U.S. economy, already teetering on the brink of a recession, over the edge.
"Consumers were vulnerable, sentiment was fragile, and this just exacerbates the situation," Ms. Cooper said.
David Rosenberg, chief economist at Merrill Lynch Canada Inc., agrees.
"It would be foolish to suggest that we're not going to avoid a deeper slowdown, especially when we were all waiting for the U.S. consumer to pull everybody alongside," he said. "That's going to take the big hit, I think."
With files from Reuters News Agency