US markets step back after morning of further decline

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FINANCIAL markets in the US stepped back from a second steep decline yesterday, but the dollar, bonds and equities recovered from early lows too late to boost European markets.

For most of the morning the dollar hovered just above 96.55 yen, the new post-war trough it had touched on Thursday. Fears about how far the dollar might fall took the yield on long treasury bonds above 8 per cent for the first time since May 1992.

International stock and bond markets followed suit. In London the FT-SE 100 index fell 30.4 points to close at 3,032.8. Gilts ended just a shade lower, aided by a closing rally as the US treasury market started to recover.

Kevin Flanagan, an analyst at Dean Witter Reynolds in New York, said: 'Markets were weak here this morning because there was still some momentum from Thursday's falls.'

Lawrence Summers, the US Treasury under-secretary, helped settle the currency late in the morning when he said: 'There are times when intervention is appropriate.'

Lloyd Bentsen, Treasury Secretary, later said the US stood ready to support the dollar, seeking to undo some of the damage he did the day before, when he said there were no intervention plans.

The currency market was also swept by strong, unconfirmed rumours of large-scale buying of dollars by the Bank of Japan.

The dollar ended the day at Y97.23 and DM1.50. The Dow Jones Industrial Average closed 19.85 points lower at 3,891.30.

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