Hong Kong fall sets scene for turmoil in markets
Tuesday 01 September 1998
The Duma's decision to reject Vicktor Chernomyrdin as prime minister came after the close of European markets, but analysts said the move would increase fears of a worsening situation in Russia.
As London traders return to their desks today after the August bank holiday, they will face markets still jittery after further volatile sessions yesterday.
Hong Kong stocks were the hardest hit with the Hang Seng losing almost 6 per cent of its value in the first seven minutes of trading yesterday following a government retreat from its massive buying campaign last Friday.
The Hang Seng eventually closed 7 per cent lower, or 544 points down, at 7,275.04. In Frankfurt, the Xetra DAX fell 114.52 points, or 2.32 per cent to close at 4,811.28. Some dealers are forecasting a further 300 point fall.
In France the CAC-40 fell 57.12 points, or 1.54 per cent to 3,651.85 on thin volume.
In Russia, where the rouble crisis sparked the global downturn, the RTS1- Interfax index dipped 1.74 per cent on minimal volume.
In Brazil, where share prices fell by 40 per cent in August, a further two per cent fall was registered when European markets closed.
Markets had drawn comfort early on from a 1.38 per cent rally in Tokyo stocks. The Nikkei closed 192.6 points higher at 14,107 though elsewhere in Asia most share markets took a tumble.
Wall Street opened strongly and was up 43 points at one stage, but that confidence soon disappeared and the early gains turned into a 135 point fall (by 4.40pm), the first time the market had slipped below the 8,000 mark since 2 February.
The Nasdaq Composite was also hammered, shedding 4.5 per cent at one stage.
On Wall Street dealers were pessimistic yesterday : "People are piling out of technology stocks," one senior trader said. "There is no news behind the plunge, just all round liquidation."
However, in London, some leading economists were more sanguine. Michael Hughes, a director of Barings Asset Management, said: "Until you can pinpoint some new news, this market will be directionless.
"The really good news would be US or UK interest rates starting to fall, but that might not happen until October or November," he said. "Until then the focus will be on the bad news, particularly the Russian situation. Uncertainty there will cap the market for a while.
"But there is no doubt that we are starting to see some semblance of value in the UK and, to some extent, in Asia."
Attention this week will shift to a meeting between American President Clinton and Boris Yeltsin.
The pair meet tomorrow while Mr Yeltsin is still grappling with the financial crisis and a political vacuum following his decision a week ago to dismiss the government led by former Prime Minister Sergei Kiriyenko.
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