Dow rally goes into second day

THE CITY breathed a collective sigh of relief as Wall Street soared for the second day running despite a continuing stream of banks owning up to suffering big hits from the Russian crisis.

The Dow Jones Industrial Average index was trading more than 100 points higher at 7,938.14, a rise of more than one per cent.

The rise followed Tuesday's 288.36 point rebound, reassuring those who feared that the recovery after two weeks of savage falls would prove to be a one-day wonder.

Earlier in London the FTSE 100 had closed up 66.7 points at 5,235.8. Equity markets elsewhere in Europe and in Asia bounced back even more strongly. Hong Kong's Hang Seng index closed more than 4 per cent up, while France's CAC-40 was 2.3 per cent up on the day.

Frankfurt's DAX jumped by a shade under 2 per cent. The German Finance Minister Theo Waigel, said Germany was sticking by forecasts of 3 per cent growth this year despite the Russian crisis.

Brokers said that after the savage falls which have wiped out all of this year's gains, stocks were starting to look attractive again. However, with little sign of any large-scale buying, dealers remained sceptical about the markets returning to the highs set in July any time soon.

"People see some value but they have a nagging doubt that it is all going to go horribly wrong," said Bob Semple at BT.Alex Brown. "I don't see the volatility going away."

Germany's Dresdner Bank came out with figures showing that its lending to Russia stood at DM1bn (pounds 350m) - 32 per cent higher than previously stated - of which 60 per cent is secured by risk provisions. That does not include an undisclosed holding in rouble-denominated bonds where the bank has written down the value of its holding by DM100m.

Two more big American banks, Chase Manhattan and Donaldson Lufkin Jenrette, disclosed losses because of the Russian turmoil.

Chase said it expected to take a $200m (pounds 120m) charge, while DLJ said profits so far this quarter were $40m down from the $120m reported this time last year.

Goldman Sachs, which is in a delicate position ahead of its flotation, said yesterday it had no intention of making any statement about any Russian exposure despite rumours that it too had lost money in the turmoil. The firm insists its exposure is minimal.

The Russian bank, SBS-Agro, yesterday admitted it could not meet $1bn of foreign obligations. SBC Warburg has been appointed to handle the restructuring.

Hamish McRae,

Review, page 5

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