Relief for shares as Dow holds gains

THE CITY breathed a collective sigh of relief as Wall Street opened with a strong rally for the second day running despite a continuing stream of banks owning up to suffering big hits from the Russian crisis.

The Dow Jones Industrial Average index was at one point over 100 points up on the day. A bout of late profit-taking eventually led the index to close down 45 points at 7,782, testifying to investor caution, but almost all Tuesday's strong gain of 288.36 points had been held.

Earlier in London the FTSE 100 had closed up 66.7 points at 5,235.8, benefiting from the Dow's initial surge. Equity markets in Europe and in Asia came back even more strongly. Hong Kong's Hang Seng Index closed over 4 per cent up, while France's CAC-40 rose 2.3 per cent.

Frankfurt's DAX jumped by a shade under 2 per cent. The German finance minister Theo Waigel, said Germany was sticking by forecasts of 3 per cent growth this year.

Brokers said that after the savage falls which have wiped out all of this year's gains, stocks were starting to look attractive again.

But with little sign of any large-scale buying, dealers remained sceptical about the markets returning to the highs, set in July, soon. "People see some value, but have a nagging doubt that it is all going to go horribly wrong," said Bob Semple at BT.Alex Brown. "I don't see the volatility going away."

Germany's Dresdner Bank came out with figures showing that its lending to Russia stood at DM1bn (pounds 350m) - 32 per cent higher than previously stated - of which 60 per cent is secured by risk provisions. That does not include an undisclosed holding in rouble-denominated bonds: the bank has written down its holding by DM100m.

Two more big American banks, Chase Manhattan and Donaldson Lufkin Jenrette, disclosed losses because of the Russian turmoil. The Russian bank, SBS- Agro, yesterday admitted it could not meet $1bn of foreign obligations. SBC Warburg has been appointed to handle the restructuring.

Hamish McRae,

Review, page 5

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