Yo-yo effect wipes 3% off shares in the UK

London

Stock markets looking into the abyss as trading started yesterday staged a dramatic recovery, and then started to fall again, in a day of extraordinary gyrations in share prices around the globe.

Stock markets looking into the abyss as trading started yesterday staged a dramatic recovery, and then started to fall again, in a day of extraordinary gyrations in share prices around the globe.

The FTSE-100 index in London plunged 4 per cent within moments of opening, wiping the equivalent of £37bn off the value of corporate Britain. This followed dives of up to 10 per cent in Asian markets overnight after Wall Street's biggest one-day points fall ever on Friday.

But when New York re-opened at 2.30pm London time yesterday, the main share price indices bounced higher. The FTSE ended yesterday down 184 points, or just under 3 per cent lower, at 5,994.6. By then, the Nasdaq index across the Atlantic, which dropped almost 10 per cent on Friday, had regained more than 2 per cent.

After London closed, however, shares in the US continued to yo-yo. "It's difficult to avoid staring at the screen as if it's a tennis match," said Gerald Holtham, a strategist at Norwich Union Investment Management, one of the UK's big investment groups.

Most investment analystswere predicting the extraordinary volatility in the markets would continue, but few expect a meltdown like that in October 1987, when US share prices fell 23 per cent in a day.

But high-tech shares have been on a ratchet of decline for a month. On Friday, news of an unexpected jump in US inflation set off the latest plunge, prompting renewed concern that interest rates will have to rise further to nip inflationary pressures in the bud.

Yesterday, AltaVista, the internet search engine, postponed its stock market launch on Nasdaq. But in Frankfurt, Europe's biggest internet service provider, T-Online, being partially floated by its parent company Deutsche Telekom, got off to a flying start when its shares jumped 25 per cent from their initial price.

In London, shares in lastminute.com, the late-booking service, dived to new lows,falling below 140p at one point to end 5.5p down at 152p, having come to the market last month at an issue price of 380p.

The declines in high-tech shares in recent weeks have given investors an opportunity to become more selective, buying at more affordable levels shares in favoured companies."The idea that this will turn into a rout is wrong," said Steven Bell, head of strategy at Deutsche Asset Management.

And Abby Joseph Cohen of Goldman Sachs in New York, the doyenne of Wall Street pundits, repeated her prediction that the broad index of US share prices will climb another 15 per cent this year.

However, Bill O'Neill, at HSBC Markets in London said the dot.com mania was unlikely to revive: "If you have bought any shares within the past two months you'll be feeling sick as a parrot. It's difficult to see a return to the euphoria."