Global equities fall seen as `correction'

MARKETS: Analysts weigh up reactions to Wall Street's tumble and what might have caused it

Stock markets around the world dived yesterday in reaction to Wall Street's plunge on Thursday, writes Diane Coyle. But most analysts saw the sell-off as a natural correction to recent strong gains, and predicted that further falls would be limited, despite another drop in US shares yesterday.

Asian markets took their lead from the previous day's 82-point fall in the Dow Jones index. There were sharp falls in share prices in Hong Kong and smaller Asian markets as well as Tokyo yesterday.

The Nikkei index fell 1 per cent to 16,140.85. Sentiment in Tokyo was also hit by more figures showing the continuing lethargy of the Japanese economy.

Money supply growth slowed more than expected in April, which economists said was due to declining consumer spending. Some traders were predicting that the index could fall below 16,000.

Hong Kong's Hang Seng index fell 2 per cent on opening in reaction to Wall Street's nose-dive. It recovered later to end 1 per cent down at 9,013.32.

John Quinn, of NatWest Investment Management in Hong Kong, said: "Wall Street exacerbated a correction that we had started to see in the last two or three days."

In the past few weeks Asian markets have benefited from new investment by American funds.

The contagion spread to London, where the FT-SE 100 index fell 24.8 points to 3261, after a fall of 11.6 on Thursday. A profits warning yesterday by WH Smith contributed to the market's decline.

Nick Knight, Nomura's chief equity strategist, said: "London has little independent life of its own. It is following Wall Street."