What began as a relatively slow slide picked up momentum in the last two hours of trading. While the urge for profit-taking may have played some part, it was comments by the Japanese Prime Minister, Ryutaro Hashimoto, that appeared most to unsettle investors.
Mr Hashimoto, who was in New York for the United Nations environment summit, told an audience at Columbia University in New York that his government would be forced to begin selling off United States securities unless action was taken to stabilise the exchange rate between the Japanese yen and the dollar. The remarks instantly sent yields rising on the bond market, where the 30-year benchmark treasury bond closed at a rate of 6.68 per cent compared with 6.66 per cent at the close last Friday.
The rout on the equities market made its mark across the board, meanwhile. Especially badly hit were the heavy industrial stocks such as aerospace manufacturer Boeing.
After breaking through the 7,800 mark briefly last week and closing last Friday at a record high of 7,796, the Dow Industrials limped home at the close last night at 7,604. It was a loss equivalent to 2.47 per cent of the value of the blue chips on the industrial index.
Also souring the mood yesterday was gathering gloom about the fate of the giant tobacco settlement announced with such ballyhoo last Friday. Fears that the deal may not pass muster with politicians in Washington led to a sell-off of all the main tobacco stocks and most notably of Philip Morris which saw a record 15 million of its shares change hands. Compaq, meanwhile, the world's largest maker of personal computers, also saw a drop in its share price following its announcement that it had agreed to purchase the rival Tandem Corporation of California.
The slump in New York is likely to have a knock-on effect on the London stock market this morning. The Dow's performance was among the factors pushing the FTSE 100 down 18 points to 4,575 yesterday, its sixth consecutive retreat.Reuse content