Europe Markets Fall Hard After Attack
By David McHugh
AP Business Writer
Thursday, Sept. 20, 2001; 3:41 p.m. EDT
FRANKFURT, Germany –– As rough as things are on Wall Street, European investors have had an even gloomier time, with steep drops in several major indexes and uncertain prospects for an upswing anytime soon.
A major reason: expectation that a European economic recovery will lag well behind one in the United States – making the tunnel longer and the light at the end harder to see, economists and market strategists said Thursday.
The major market indexes on the Paris, London and Frankfurt exchanges have fallen even harder than the U.S. Dow, which is down some 12 percent since the New York Stock Exchange reopened following last week's terrorist attacks. It had been closed since Sept. 11, when suicide pilots flew two jetliners into the World Trade Center towers, one into the Pentagon and another that crashed in Pennsylvania.
Frankfurt's Xetra DAX has fallen 18.1 percent, the Paris CAC index 14.3 percent and London's FTSE 9.5 percent.
Economists said European stocks were already weighed down by the sluggish economy and corporate earnings in Europe, as well as by the sense that European economies had to wait for a recovery in the United States. Now that wait will be even longer.
"The thing Europe is concerned about is, a slowdown in the U.S. means a prolonged slowdown in Europe, said David Page, an economist at Investech Bank UK in London. "I think the U.S. market is looking a bit further forward and that people can see through the bottom of the trough. ... Once you see a concerted recovery in the U.S., you can start the countdown" in Europe.
Page noted that European government authorities have less room to ease fiscal and monetary policy. The European Central Bank followed the U.S. Federal Reserve in making a rate cut Monday to reassure markets before the New York Stock Exchange opened.
But the ECB has cut interest rates only three times this year compared with nine by the fed, and governments are constrained by European Union agreements from boosting spending to stimulate their economies. U.S. officials have proposed a stimulus package and a bailout for the hard-hit airline industry; the European Union on the other hand prevents governments from aiding airlines.
European markets may also be worried by the prospects of a weaker dollar. The strong dollar has made Europe exports cheaper in the United States. A backslide by the dollar "would transfer the recessionary tendency from the United States to Europe," Lenhoff said.
Gareth Evans, market strategist at ING Barings in London, agreed that the short-term would be difficult. "I expect the market to struggle for the next month or so."
Evans and others, however, noted that stocks had fallen so far that they were becoming potentially more attractive to investors – minus the cloud of uncertainty about a possible U.S. military response and how much such a conflict could disrupt the world economy. Others suggested that the full impact may not have been felt yet in the United States, where the Dow fell sharply again Thursday.
"There may be some catching up to do in America," said Lenhoff. "The story isn't over yet."
washingtonpost.com
Anyone for DOW 8,000? How about DOW 6,000-6,500??
Entirely possible in my opinion.
However, we're also looking at inflation worries as the USD declines, as well as higher cost of imported energy.
Thus, oil stocks should do alright, as well as alternative energy stocks (Ballard and a few others)...
Defense stocks may not do as well as suspected, since this is not a conventional war we're involved in, but more of a covert war. Ammunition manufacturers and specialized weapons and surveillance manufacturers may prosper more than the aircraft manufacturers. |
