City ready for share plunge

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The Independent Online
The City is bracing itself for a stock market plunge when trading gets under way today in the wake of Friday's 171-point dive on Wall Street. But the general belief is that a likely fall will be limited to about 50 points being wiped off the value of the FTSE index of the UK's top 100 companies, coming after a 48-point fall on Friday.

The Dow Jones fall, the third heaviest in Wall Street's history, was triggered by much stronger than expected February jobs figures in the US.

Cuts in the cost of borrowing and hopes of further reductions have fuelled big stock market rises in the UK and the US over the past 15 months. In London, the stock market in early dealing on Friday rose 12 points following the interest rate cut of one-quarter of 1 per cent, but the economic data from the US and Wall Street's reaction unsettled confidence .

John Reynolds, head of strategy at NatWest Markets, said he believed a fall of between 30 and 50 points by the FTSE index was inevitable in early trading before Wall Street opens at 2.30pm British time.

"The general view among economists was that the US economy was quite weak and that interest rates would be cut through March and April, but it would appear that the underlying economy has been more robust than originally felt."

Mr Reynolds pointed out American share prices were already at very high levels and a correction was always likely.

The UK stock market reached an all-time high last week, on 5 March, of 3792.5.

Dealers and analysts will be anxious for further data on the domestic economy this week.

`Cut too far', page 17