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

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?