Wall Street hopes for message of defiance

Global slowdown or business as usual? Leo Lewis reports from New York on the financial community's response to catastrophe

Financial markets around the world are fuelled by raw emotion; so when New York equities begin trading on Monday, they will have an explosive mix to run on.

Financial markets around the world are fuelled by raw emotion; so when New York equities begin trading on Monday, they will have an explosive mix to run on.

Following the terrorist attacks that have crippled so much of New York's main financial district, the Exchange Authorities have wrestled with when exactly to reopen the markets. Bonds began trading on Thursday, but equities have had to wait through the longest suspension in trading since 1914.

The question is: what will happen when the world's deepest, most liquid and most respected equity market flicks back on line. Can we expect the sort of crash that usually accompanies disasters? Or will the market makers, traders and investment houses conduct their affairs in an orderly manner?

These questions are taxing the analysts and market observers whose jobs usually involve graphs, balance sheets and company accounts. Now these analysts have turned their hands to market psychology, and the profile they are drawing is not pretty.

The terrorist crisis hit at a time when the market was going through its own crisis – of confidence. In the weeks preceding the disaster, markets around the world had suffered massive percentage losses as the looming threat of recession took hold. That recession is again the main talking point. Those who believed that the end of the year might see a recovery are being shouted down by those who see this as the last straw and believe the world is staring at the terrifying prospect of a simultaneous global slowdown.

But there is something extremely symbolic about the reopening of these markets that has not been lost on those who participate in it. Whether it is friends, contacts or business associates, everyone has lost someone, and everyone's daily life on the trading floors has been bitterly and destructively affected. Coffee shop chatter normally concerns the prospects of a particular stock; now all the talk is of showing the world that America, via its markets, will not be cowed.

But everyone knows that it will be an incredibly difficult show to pull off. Certainly the patriotism is there and the bond markets and other non-New-York-based exchanges have shown that they are prepared to behave reasonably. As one Goldman Sachs executive pointed out: "Nobody wants to be the first to put in a trade that is going to disrupt things and be remembered forever as the trigger that sent these fragile markets into terminal decline."

But, besides emotions, markets also run on rumours; and the talk has already come round to what people should do with their stocks and shares when trading starts. Much of the attention will focus on the insurance sector. AIG, Berkshire Hathaway and others have said that individual company payouts will likely be between $500m and $1bn each. Accordingly, these are the companies that could take the initial brunt of any panic selling.

Other stock areas that will be badly affected are the telecoms sector, whose infrastructure in Lower Manhattan was so badly hurt, and media companies that have lost out on millions of dollars' worth of advertising as TV stations show round-the-clock coverage of the unfolding crisis.

Biotechnology is another loser. The World Trade Centre housed a thousand employees of Genentech, a leading pioneer of several groundbreaking healthcare technologies.

Conversely, investors are working out which companies might gain from this disaster. Those that make security equipment, defence companies, drug companies and other traditionally defensive stocks are all expected to feel modest boosts as the investment community returns to work. But, however the stock-picking pans out, Monday is certain to be a day charged with high feelings.

Unlike the Nasdaq, the New York Stock Exchange operates on an open-floor trading system. As one regular trader said: "Because the Exchange has usually got such a hustle and bustle, I think you are going to see some really high emotions when everyone gets back.

"I don't know how many people are going to be able to get in to work at all and, when people see gaps, they are going to assume the worst. It could turn out to be an incredibly sombre day; one of my friends is unaccounted for and I find it hard to put stocks and shares at the front of my mind."

But back in the coffee bars of mid-town Manhattan it is thought that perhaps the greatest sign that Wall Street remains unbowed will be a normal day's trading. Given that big companies such as Oracle and Cisco have already come out with trading comments that would usually send the market lower, it is possible that, as a gesture that they are still in charge, the big investment banks will simply behave as usual and punish the stocks in trouble.