Investors run for cover as Russia crisis hits markets

FINANCIAL MARKETS around the globe were in free fall yesterday as fears that the crisis hitting Russia is about to engulf other emerging markets sent investors scurrying for cover.

The FTSE 100 index closed 190.4 points down at 5,477, one of its worst points falls ever, having at one stage fallen by more than 212 points. On Wall Street, the Dow Jones was trading more than 240 points off at midday, but clawed back to close down 78 points at 8,534. Bonds rallied sharply, with yields slumping to record lows on Wall Street as investors sought the safe haven of the US Treasury market.

US banks like JP Morgan, Citicorp and Chase Manhattan, which have big positions in emerging market debt, were among the biggest fallers in a day of panic trading. Credit Suisse, the Swiss banking parent of Credit Suisse First Boston also fell sharply in Zurich, on deepening fears that it is facing a huge loss from the Russian crisis.

The biggest casualties in a day of frantic trading were currencies and local debt markets in Asia, Latin America and Eastern Europe. These were collapsing as investors took the cue from the latest Russian upheaval to bail out of emerging markets in force.

Yesterday, the Turkish authorities were intervening to support the lira, the South African rand was under pressure, and in Latin America the currencies of Mexico, Argentina and Brazil suffered big falls against the US dollar amid signs that the Venezuelan bolivar was about to go. Stock markets in Latin America saw falls of between 6 and 8 per cent.

Dealers said that this week's Russian crisis had brought home to investors that the governments of the big industrial nations have run out of patience with investors. The International Monetary Fund has little more than $10bn in the kitty after shelling out some $40bn (pounds 25bn) to fund rescues in Korea, Indonesia and Thailand in the past year.

"The IMF and the G7 have called a halt to easy bail-outs. The new international strategy is to play hardball," said Paul Horne, European equity markets economist at Salomon Smith Barney, the US investment bank.

Germany, which was under a cloud because of its banks' relatively high exposure to Russia, saw its stock market index, the DAX, fall by more than 4 per cent. A meeting between representatives of the big Russian banks and the Russian authorities failed to provide much in the way of reassurance.

"The appetite for risk in the world has gone to an all-time low," said Stuart Brown, head of emerging market research at Paribas, the French bank. "People are saying - we don't know where or when the next shock is going to come from: China? Hong Kong? more in Russia? Latin America? - let's get out together."

Dealers said the worries about emerging markets had hit already fragile markets hard because of the spate of profits warnings by big US companies hit by the Asian crisis. Nervousness about the US political backdrop, with the Monica Lewinsky affair still eating away at the confidence in US President Bill Clinton and fears of a backlash in the wake of Thursday's bombing of Islamic terrorist targets in Afghanistan and Sudan, did not help.

The pound, by contrast, had a good day in the exchanges as domestic worries took a back seat to concerns about far more serious problems elsewhere.

Sterling soared a pfennig and a half to DM2.942 and was nearly a cent higher at $1.6357. The yen weakened sharply despite rumours that the Bank of Japan was preparing to intervene in the markets, trading at 145 compared with 143 on Thursday.

Who's next? Page 19

Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
David Moyes and Louis van Gaal
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A cabin crew member photographed the devastation after one flight
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits