Stock markets around the world are facing major falls, after the New York market plunged yesterday to one of its biggest losses of recent years. In frantic last-hour trading on Wall Street last night, the Dow Jones index collapsed by more than 500 points as the market fellby over 6 per cent.
The last-hour collapse took investors by surprise as until then the Dow had been trading in a range of 100-200 points below its overnight level and early trading showed none of the panic that gripped the market in the final hour.
In first trading in Tokyo early today stocks dropped more than 3 per cent, with the Nikkei average falling 443.15 points to 13.664.74, the lowest since March 3rd, 1986.
Yesterday's falls on Wall Street are second only in recent years to the losses suffered last October when the Dow Jones fell by 554 points or 7.18 per cent. In terms of points on the index it was the second-biggest fall ever, but in percentage terms it was lower then either 1929 or 1987. All European markets are set to open sharply lower as a result today and will nervously await Wall Street's opening.
Analysts said the selling snowballed after the Dow fell below 8,000 points, which had been considered a key psychological floor for the market.
Technology shares suffered the brunt of the selling pressure, with the technology-based NASDAQ index suffering its biggest ever points fall and huge falls among Irish stocks quoted on this market. Even the blue-chip stocks like Intel and Microsoft collapsed as institutional investors rushed to sell shares and put their money into cash and American government bonds. The NASDAQ Index closed nearly 9 per cent lower, with most of the Irish technology shares on the NASDAQ market down by at least 9 per cent.
The American government bond market benefited from investors' flight to quality, pushing the yield - or interest rate - on the 30-year Treasury bond down to 5.26 per cent, the lowest level since the government began selling them in 1977.
Market analysts on Wall Street said the main reason for the selloff was the fear of losing money, "the fear of being left holding the bag". That fear overtook any fundamental concerns about the Russian financial crisis, its spillover into other emerging markets in Latin America, the Far East and Eastern Europe or the risk of global recession.
Analysts stressed one of the most negative aspects of last night's collapse was that it was caused by institutional and not small private investors.
Dealers around the world appeared unimpressed by the first signs that leaders of the major western economies had begun intense consultations on how to respond to the Russian crisis.
The European Commission called for an emergency meeting of Europe's finance ministers, with Commission officials lobbying for something more positive than the current policy of no assistance until the Russians carry out fundamental reforms.
European stock markets were pushed into negative ground in late trade after the Dow Jones began to slide soon after opening. Already, the Irish market has lost virtually all of its gains this year and today is likely to see efforts by institutional investors to sell large volumes of stock, although there are likely to be few buyers. Sources believe if the Irish market does fall heavily over the next few weeks, it could jeopardise the flotation of the likes of First National Building Society.
