Attack could have untold impact on world economy

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The Independent US

The terrorist attack that ripped the heart out of the world's financial centre could have an untold impact on the global economy, City experts warned today.

The US economy is now almost certain to plunge into a recession before the end of the year, and the rest of the world could follow, they said.

A co-ordinated round of interest rate cuts in the UK, the Euro-zone and the US may even take place within the next week to help boost the markets.

Philip Shaw, chief economist at City stockbroker Investec, said: "The ramifications are potentially extremely serious.

He explained the extent of the impact may not be known until trading resumes on the New York Stock Exchange. Wall Street is closed today.

"The extent at which the US market opens down is unknown but if unchecked it could lead to a big slide in confidence in markets and consumer confidence.

"We should see the US slide into technical recession this year and the rest of the global economy will suffer as a result.

"The one thing stopping the UK markets falling further is the expectation of cuts in interest rates, and there is a strong possibility of a co-ordinated round of cuts from the major central banks in the next few days."

The uncertainty provoked by yesterday's attack was reflected on the FTSE 100 Index in London where close to £21 billion was wiped off the value of Britain's leading companies in the first ten minutes of trading.

The Footsie recovered in the next 20 minutes to stand up 54.7 points at 4800.7 after half an hour, with Marconi leading the way. Fifteen minutes later it was back down to 4749.2.

Mr Shaw said the one thing that could prevent the UK economy sliding into recession was the strong retail sector and buoyant housing market.

"If the consumer does his bit we should escape recession."

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