Rallying Dow halts plunge in London

THE US stock market staged a spectacular recovery yesterday, recouping more than half the losses of Monday's plunge on a day of record trading.

Rumours of a co-ordinated cut in international interest rates by the Group of Seven industrialised countries helped to drive it up, and speculation is rising that the US may ease interest rates in response to the weaker economy and stock market. But traders said that there was still fundamental uncertainty about the longer-term direction.

The New York Stock Exchange opened strongly, retreated by 140 points, then advanced to 358 points up before closing 288.36 up at 7,827.43, the second-largest points gain ever.

Two of Wall Street's top analysts, Abby Joseph Cohen of Goldman Sachs and Greg Smith of Prudential Securities, both recommended that investors shift back into equities. But what is still uncertain is whether yesterday marks a long-term change of direction or a correction.

The Clinton administration continues to make soothing noises about the US economy, insisting that nothing it it justifies the market weakness and that growth will continue. The Deputy Treasury Secretary, Larry Summers, said at a briefing in Moscow: "We believe our fundamental economic policy is sound. We believe our people are working at record rates and we are determined to stay on a path of fiscal discipline that brought us to where we are."

However, there was no consistent pattern to yesterday's price movements in major markets. In London the FTSE swung wildly; at its lowest it was down 173.7 points, but it rallied to close at 5,169.1 - a day's loss of 80.3 points.

This was much less than expected, given that the London market was closed for on Monday and had some catching up to do after the Dow plunged 512.61 pointsthat day.

There is as yet little assurance that the volatility on Wall Street is over. "Wall Street still looks very vulnerable," said Ian Harwood, head of Economics and Strategy at DKB.

"The reason it has been going down is that people have begun to realise that company earnings expectations are unrealistic," said Mr Harwood. "To expect 15 per cent profits growth to continue next year is manifestly absurd."

Most other markets resisted the Dow's Monday slump. In Japan the Nikkei showed an unexpected bounce, gaining 261.74 points to close at 14,369.63. But Hong Kong lost nearly 3 per cent of its value.

Most markets in Europe followed the same muted pattern as London. The heaviest fall was in Milan, where prices fell by 2 per cent. But the Paris CAC-40 index was down only 5.56 points at 3,646.29, while in Germany the DAX, helped by Wall Street's rally, rose by 44.61 points to 4,855.89.

Outlook, page 15

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive + incentives + uncapped comms: SThree:...

Recruitment Genius: Telesales Executive - OTE £25,000

£13000 - £25000 per annum: Recruitment Genius: Would you like to be part of a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Day In a Page

The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future