World stock markets went into reverse again yesterday after the crash of the American Airlines jet in New York.
The FTSE-100 index of leading shares closed 98 points lower at 5146.2, having plunged 178.9 points in the minutes immediately after news of the crash filtered through.
In New York, the Dow Jones Industrial Average shed almost 200 points at one stage before rallying in afternoon trading.
The declines in shares wiped out some of the gains made in the past few weeks when markets had begun to shrug off the effects of the terrorist attacks on 11 September. During that time the FTSE-100 rallied from its low of 4433.7 on 21 September, to 5278 earlier this month.
"The mood is nervous," said Dominic Freud, the head of European equities trading at US broker SG Cowen. "We had really been getting back to normality and sentiment was turning around for positive. This has really been a blow."
Airline shares fell around the world with British Airways shares losing 12 per cent of their value just after the crash. Also hit was the engine maker Rolls-Royce and the airports operator BAA. In the US, shares in AMR Corp, which owns American Airlines, fell 13 per cent within an hour of the crash.
Equity strategists said markets would remain jumpy regardless of the cause of the crash. Richard Jeffrey, the chief economist at Charterhouse Securities in London, said: "It re-emphasises the point that despite the apparent calm on the surface of the markets there is still a lot of underlying tension. Markets will continue to react – or over-react – rapidly to any event of this kind whether economic or political."
On the cause of the crash Mr Jeffrey added. "If it's terrorist action then the long-term market reaction will be depend on the subsequent political response, just as it did on 11 September. If it's engine failure, or something similar, then there will be question marks over the airlines and whether they are taking short cuts on things like aircraft maintenance because they are in financial difficulty."
In other markets the oil price fell again on renewed fears over air travel and falling demand for oil. The benchmark Brent crude price for December delivery fell $1.13 a barrel to $20.25 by late afternoon. Ministers from Opec, the oil producers cartel, will meet in Vienna tomorrow to discuss a possible cut in production of 1.5m barrels a day in an attempt to shore up the price.
The price of gold jumped $2.30 to $280.00 a troy ounce as investors piled into safe investments. The pound was little changed against the dollar, although the dollar fell against many other currencies.Reuse content