London market in for a rough ride

THE CRUMBLING of stock markets around the world on Friday as the Asian flu spread to Latin America could well prompt serious turmoil in London and New York tomorrow when exchanges open.

"The markets are beginning to recognise that the Asian financial crisis has evolved into a global crisis and is having perceptible effects on industrial economies," said George Magnus, the chief economist at SBC Warburg.

He and other analysts remain unclear about whether Friday was the start of the long-threatened bear market or another bout of turbulence in increasingly volatile but fundamentally upbeat trading.

However, James Mitchell, a global strategist at Nomura, struck a sombre note declaring "potentially, it looks pretty serious."

Mr Mitchell hedged his bearishness by pointing out the Dow could rally 2-3 per cent tomorrow, lifting European markets. But he also said: "There's a lot of talk about a market correction. This could snowball and become a crash."

The FT-SE 100 stock index was down on Friday 190.4 to 5,477, its biggest one-day fall since 1987. The Dow Jones Industrial Average also flirted with disaster, dipping 280 points, before closing down 77.76, or 0.9 per cent, at 8,533.65.

Continental Europe was also hit hard. Key indexes for many local bourses were down between 3 and 4 per cent, while Germany's Dax closed 5.9 per cent lower as German bankers and representatives from Russia's stricken government and banks met in Frankfurt to discuss the financial crisis in Moscow.

The market is still reacting to the announcement last Monday that Russia was defaulting on $45bn in treasury bonds and devaluing the rouble 34 per cent. But on Friday the focus of fears moved to Latin America, where Russia's problems and the weak oil price combined to spark rumours that Venezuela and possibly Brazil were about to devalue their currencies.

Investors have been bailing out of emerging markets since last October. But they are now bailing out of shares on the biggest exchanges to pile defensively into bonds.

"You can't see the Asian financial crisis in the US economic figures yet," said Mr Magnus at SBC Warburg. "But it's there in the earnings figures of US companies - and it's there in the figures showing US companies are not investing."

Mr Magnus raised the possibility of a vicious circle in which lower earnings by US companies leads to lower share prices, which in turn would lead to lower consumer spending in the US and even lower company earnings.

"I think the next move by the US Federal Reserve Bank will be to ease interest rates," he said.

But London could benefit from global turmoil if investors judge it a safe haven against an overvalued US market.

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
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

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star