Some Europe Markets Recover Ground
Oct. 28, 1997
LONDON (AP) _ Spooked by the plunge on the New York Stock Exchange, overseas markets fell dramatically today with Hong Kong's posting its largest selloff since 1989. The London exchange skidded sharply lower before recovering most of its loss on the heels of a surprising rally by U.S. stocks.
The New York market, opening just as many exchanges elsewhere were closing, saw the Dow Jones industrial average drop more than 175 points in the first minutes of trading. But it recovered strongly, posting its biggest point gain ever for a single day and smashing the volume record with more than 1.1 billion shares traded. The Dow rose 337.17 points _ 4.7 percent _ to 7,498.32.
The brighter outlook in New York helped lift prices off morning lows in London, Paris, Milan and some smaller markets.
London's Financial Times-Stock Exchange 100-share index closed with a loss of 85.3 points, or nearly 1.8 percent, at 4,755.4. It had been off as much as 457.9 points, nearly 9.5 percent, earlier in the day _ almost double the record 250-point drop from the Black Monday crash of October 1987.
``We'd have to go back to 1987 to see falls of similar nature, although not entirely comparable,'' said Neil MacKinnon, chief economist with Citibank in London. ``But there's no doubt that investor sentiment's been badly rattled.''
The recovery in New York came too late for markets across Asia and many in Europe to react. Those markets dropped sharply today as investors responded to Monday's decline in U.S. stocks _ a 554-point, 7.2 percent fall, that was the worst single-day point drop in the history of the Dow industrials.
But the U.S. decline Monday hardly compared to Hong Kong, where the market shed 13.7 percent today. The exchange has now lost 33 percent of its value in the past seven trading days and 45 percent from its peak of 16,673.27 on Aug. 7.
In Tokyo, the Nikkei market today lost 725.67 points, or 4.26 percent, to close the session at 16,312.69 _ its lowest level since July 1995.
Asia's overnight drops soon spread to Europe.
Frankfurt's DAX index finished with a loss of 8 percent, barely clawing back from its morning declines that pushed it down by 10 percent as German Economics Minister Guenther Rexrodt warned against ``panic and overreaction.''
Stocks on the Russian market dropped 19 percent, the worst one-day loss on record.
Prices tumbled 16.5 percent on Hungary's Budapest Stock Exchange. In Warsaw, Poland, and Bucharest, Romania, prices fell by 9.8 percent and 8.9 percent, respectively.
Along with London, some European exchanges had time to react to Wall Street.
French stocks recouped more than half of their losses in the final 45 minutes of trading, finishing with a loss of 4.27 percent, at 2,651.33 points.
The Netherlands' market closed down 2.9 percent, after falling as low as 11 percent. And Italy rebounded from a 10 percent low to close down 6.2 percent.
The Spanish market avoided a 10 percent drop in early trading _ its steepest ever _ by extending its close by 30 minutes to allow investors time to respond to New York stocks. The market then closed down 24.28 points or 4.4 percent.
Israel's Tel Aviv Stock Exchange briefly suspended trading after share prices plummeted 8 percent. The market closed down nearly 10 percent.
Analysts said the chain-reaction global selloffs, which began in Thailand and smaller Asian markets before striking Hong Kong, were likely to continue because of investor panic and because the New York market had been considered overvalued.
``And so the whole thing goes around and around again,'' said Gilbert K. Chu, executive director of Sun Hung Kai Securities Ltd. in Hong Kong.
The big question when Asian stock markets opened today was how low they would go. Hong Kong brokers were anticipating a fall of 1,000 points from the Monday close of 10,498.20 _ which itself was down 5.8 percent from Friday.
But what they got was a tumble of 1,203 points or 11.45 percent in the first two minutes. By midday it had fallen 15.44 percent _ and at one point surpassed 16.4 percent.
The Hang Seng blue-chip index closed 1,438.31 points lower at 9,059.89, off 13.7 percent.
The fall exceeded Thursday's 10 percent crash and was the worst since 1989, when the market lost 22 percent in reaction to the Chinese army suppression of pro-democracy protests in Beijing's Tiananmen Square.
Hong Kong's street economy has yet to feel the impact of the market price falls, but slower growth, fewer home purchases, slower luxury sales, less dining out is inevitable.
``We will see it in the next six months to 12 months,'' said Sun Hung Kai's Chu. ``It makes the picture a lot less rosy compared to, say, three months ago.''
No one has found any link between the market drop and Hong Kong's July 1 handover from British to Chinese rule. Investors and analysts alike said the plunge would have happened no matter what flag was flying.
In keeping with their pledges of autonomy for Hong Kong, Chinese financial officials have taken a hands-off stance while expressing their confidence in the territory's economic soundness.
In the generally accepted scenario, the market dominos started falling in southeast Asia over the summer when investors dumped regional currencies and stocks, nervous over rising debt and falling exports. The contagion spread to Hong Kong last week, when speculators judged the Hong Kong dollar overvalued.
Government moves to defend the currency were successful but pushed up interest rates, hurting corporate earning prospects and sending the market plummeting 10 percent in one day. The Hong Kong dollar was stronger early today.