English/Nat
The U-K stock market endured a nerve racking rollercoaster ride on Tuesday as a surprise rally on Wall Street helped shares in London bounce back from a record fall.
Nearly 132 (b) billion dollars was wiped off shares in leading British companies at one point as the Financial Times Stock Exchange 100 index plunged by 457 points - the biggest fall in its history.
But the fear that had gripped the market disappeared when New York stocks staged a dramatic U-turn that signalled an end to the wave of panic that had swept across international money markets over the past week.
London newspapers carried the story of a meltdown on stock markets on Tuesday as they suffered their most drastic crisis since 1987's Black Monday.
In a frantic day's trading, the Financial Times Stock Exchange 100 index climbed back from its lows to finish just 85.3 points lower on the day at 4-thousand-755.4,
The recovery in London reflected events on Wall Street where the market trembled as the Dow Jones index plunged to an early fall of more than 100 points, only to bounce back and show a gain of 112 points within a couple of hours.
But early in the day the FTSE 100 index of British blue chips fell by more than nine per cent.
At 1240 G-M-T the index had dropped by 6.69 per cent - down 324 points at 4-thousand-516.
Analysts cited turmoil in Hong Kong as the main trigger, although they said a meltdown was waiting to happen, with stock markets in general being overvalued.
The London Markets Regulatory chief said the most important thing in this situation was the liquidity of financial institutions.
SOUNDBITE: (English)
"Obviously the concern that we would have is liquidity because a fall in prices on the stock market, while unfortunate for the holders of shares, doesn't necessarily carry any consequences for anyone else accept for those holders. But of course you have to be sure that liquidity is available to institutions, and in a fast-moving situation, and so that would be the main focus of our attention."
SUPER CAPTION: Howard Davies, London Markets Regulatory Chief
At NatWest Stockbrokers in London workers braced themselves for the opening of the New York Stock Exchange.
The FTSE 100 index slipped close to the day's lowest levels when 132 (b) billion dollars was wiped off shares in a 457 points fall in the minutes before Wall Street opened at 1430 G-M-T.
Within 10 minutes of U-S trading resuming the FTSE recovered and was showing a fall of 376.9 points, down to 4-thousand-471.9.
But the head of research at NatWest Stockbrokers said the bottom of the downturn may not yet have been reached.
SOUNDBITE: (English)
"When sentiment turns we do have a vicious downward spiral. What we're now waiting for is a sign that that downward spiral is petering out and the bottom has been reached, but at the moment there's not sign of it."
SUPER CAPTION: Jeremy Batstone, Head of Research, NatWest Stockbrokers
The head of dealing at NatWest stockbrokers said the situation was more one of a stock market correction than a crash.
SOUNDBITE: (English)
"It sounds very glib of me to say that we would consider it to be a correction. Even at worst when it was 450 points down this morning we're talking about ten per cent or so which is less than half the level it was in '87 which is generally accepted to be a crash, so we maintain that the market itself is strong, the economy is strong, and we are looking at a correction here."
SUPER CAPTION: Richard Hunter, Head of Dealing, NatWest Stockbrokers
At Citibank in London, early trading was frantic.
Analysts say that although the fundamentals are different to those in 1987, when the Dow crashed 22.6 per cent, there are still serious ramifications to the current crisis.
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