Hang on to your gold stocks.....
Tokyo Off, Safe Assets Jump After Attack
Sep 11 9:59pm ET
By Jason Szep
TOKYO (Reuters) - Investors across the world snapped up traditional safe assets like gold and bonds on Wednesday after the worst attack on U.S. soil since Pearl Harbor pummeled global stocks, shook the U.S. dollar and drove up oil prices.
After a delayed opening, Tokyo stocks slid to 17-year lows, with the key Nikkei stock average losing 6.23 percent to 9,651.62 -- breaching 10,000 for the first time since August 1984.
Key European stock indices fell to their lowest levels since December 1998 after two hijacked passenger aircraft ripped into the 110-storey twin towers of the World Trade Center in New York, triggering huge blasts that hit at the heart of global finance.
Main U.S. markets were closed after the attacks, which occurred just as the trading day was about to begin.
Panicked investors, seeking a safe haven for their cash on worries the United States could slide into recession, drove up prices of U.S. Treasury bonds, gold, oil and industrial metals.
"The market is filled with uncertainty," said Tatsuyuki Kawasaki, director of equities at Kaneyama Securities in Tokyo.
U.S. markets are not expected to re-open until Wednesday -- the first time the New York Stock Exchange has been closed for two consecutive days since the end of World War Two.
The dollar clawed back some ground in thin early Tokyo trade, limping away from troughs hit just after three hijacked planes slammed into the World Trade Center and the Pentagon.
The U.S. currency bounced back nearly one percent to above 119.50 yen from lows of around 118.50 late on Tuesday.
But dealers said the market was virtually paralyzed and volumes were extremely light.
"If you think calmly, the attacks seem to be a serious blow to the U.S. economy, with all major league baseball games canceled and Disney World shutting down. Economic sentiment is likely to worsen quickly," said Toshiyuki Suzuki, economist at Sanwa Bank in New York.
Spot gold opened in Hong Kong at US$283.50/8.50 an ounce on Wednesday, up $12 from Asia's finish a day before.
Yen-based crude oil futures on the Tokyo Commodity Exchange also surged by daily price limits at the open after London Brent futures hit a peak of $31.05 a barrel, their highest since December last year, before closing up nearly six percent.
"We can expect confusion," Darrel Whitten, head of research at ABN Amro Securities in Tokyo, said of the market outlook.
Stocks in Singapore were down 8.43 percent at the opening, while Australian shares were down over four percent at midday.
In Tokyo, Sony Corp, an electronics manufacturer that depends on the U.S. market for about 30 percent of its sales, were untraded with an "ask only" quote five percent down from Tuesday's close.
FEARS OF A WALL STREET SLIDE
U.S. stocks, were expected to tumble sharply when trading reopens. The New York Stock Exchange, the American Stock Exchange and Nasdaq said they will remain closed through Wednesday.
The exchanges said they would decide on Wednesday, with input from the Securities and Exchange Commission, on when to reopen. Most markets in Europe and Asia were open as usual.
Stanley Nabi, managing director at Credit Suisse Asset Management in New York, which oversees funds of $110 billion, said "it will be awful" when trading resumes.
"There are two reasons. The first is psychological. Obviously, this is a blow. The second is fundamental. I think this will make the slowdown accelerate into a recession."
Trading in U.S. Treasury bonds was closed in Tokyo after the market was effectively frozen in morning New York trade on the recommendation of the Bond Market Association.
Two-year note yields were pinned at 3.31 percent, a historic low, but New York traders said quotes were not reliable given the mayhem. Bond prices in Tokyo and Australia rose.
The U.S. bond association said it had recommended that trading be halted on Wednesday. A spokesman said the industry trade group was taking the situation "day by day" and would review on Wednesday the timing of a reopening.
Cantor Fitzgerald and Garban-Intercapital, two of the world's largest fixed-income interdealer brokers, were located in the World Trade Center.
The Chicago Board of Trade and the Chicago Mercantile Exchange, both closed on Tuesday, canceled electronic trading for Tuesday evening and said open outcry pit trading would be closed on Wednesday.
The New York Board of Trade's Chairman, Charles Falk, said his exchange, which was housed at Four World Trade Center, suffered "significant damage" and he was not sure if it could be restored. NYBOT has a backup facility on Long Island.
Loss of life was expected to be catastrophic from the collapse of the once-mighty twin towers, where roughly 40,000 people, most of them linked to financial markets, worked.
Traders said they feared U.S. benchmark stock indexes, already near their lowest levels of the year, could fall as much as five percent when trading reopened.
Stocks in Europe screeched more than five percent lower following the tragedy. London's FTSE 100 index shed 5.7 percent in its biggest one-day fall since the crash of October 1987, wiping $98 billion off the value of shares.
William McDonough, president of the Federal Reserve Bank of New York which oversees U.S. monetary policy and plays a key role in ensuring stability in global financial markets, said the U.S. central bank was standing by to provide liquidity. |
