Stocks in Europe, Dollar Plunge While Oil, Bonds Surge After U.S. Attacks
09/11 14:45
Stocks Tumble, Oil and Bonds Advance, After Attacks on U.S.
By David Tweed
London, Sept. 11 (Bloomberg) -- Stocks and the dollar plunged, while oil and bonds surged, after the biggest ever terrorist attacks in the U.S. demolished New York's World Trade Center and damaged the Pentagon.
The drop in European shares was led by insurers such as Swiss Reinsurance Co. and Axa SA on concern about claims they will face in the U.S. Benchmark stock indexes in the U.K. and France logged the biggest declines since the crash of October 1987. Markets in the U.S. and Latin American were shut.
Investors are concerned attacks will escalate and get ``totally out of control,'' said Ian MacFarlane, who helps manage 38 billion pounds ($56 billion) at Friends Ivory & Sime Plc.
U.S. government two-year note yields dropped 25 basis points to 3.24 percent as investors sought securities likely to hold their value should equities slump when U.S. markets open. Gold jumped as much as 7 percent, while crude oil rose 13 percent.
Terrorists hijacked commercial airliners and crashed them into the World Trade Center, destroying the 110-story twin towers. Another plane hit the Pentagon, and a fourth crashed with about 300 people on board outside Pittsburgh.
The attacks make ``recession in the U.S. more likely'' as consumer confidence is likely to slump, said Martin Bayntun, who helps manage about 15 billion pounds ($22 billion) at Gartmore Investment Management.
The dollar fell 1.7 percent against the euro to 91.47, the biggest drop in five months. The U.S. currency dropped 2.7 percent against the Swiss franc to 1.6401 francs.
U.S. stocks traded in Europe fell. International Business Machines Corp. dropped $6.83 to $89.64 in Germany; Procter & Gamble Co. shed $7.42 to $66.78, and Microsoft Corp. fell $5.44 to $52.14. General Electric Co. slid $2.81 to $36.54.
Interest-Rate Cuts?
Yields on interest rate futures contracts in Europe dropped, showing that investors expect central banks to lower benchmark lending rates to counter the threat of recession. The rate on the three-month euro contract for September settlement dropped 10 basis points to 4.12 percent, below today's three-month money market rate of 4.24. U.S. contracts weren't traded.
``The economic outcome of this is so huge,'' said Conrad Mattern, a fund manager at Deka Investment Management GmbH in Frankfurt, which oversees 48 billion euros ($43.6 billion). ``Consumer sentiment will be hit hard, which may lead to less expenditure. This will have a negative impact on U.S. growth.''
Insurance stocks fell the most in Europe on concern they will face claims in the U.S. Swiss Re and Munich Re, the world's two biggest reinsurers, fell 17 percent and 16 percent respectively. Axa dropped 3.51 euros, or 13 percent, to 22.89 euros.
``It's a blow to confidence in the financial system and in the capitalist world,'' said Alan Beaney, who helps manage 410 million pounds at Principal Investment Management Ltd. ``This is a test to world order.''
Airline Stocks Slide
Airline stocks also fell. British Airways Plc, operator of the busiest transatlantic service, dropped 56p, or 21 percent, to 208, paring a gain of as much as 2.7 percent before the attacks. Lufthansa AG, Europe's No. 2 airline, slumped 2.31 euros, or 15 percent, to 13 euros. Airtours Plc, the U.K.'s second-biggest tour operator, dropped 15p, or 6 percent, to 232p.
Japanese stocks are likely to decline in trading Wednesday, possibly dragging the Nikkei 225 Index below 10,000 for the first time since August 1984, futures contracts suggested. Nikkei 225 futures fell as low as 10,000 before trading was halted in Chicago, down from 10,320 in Osaka Tuesday.
Shares of oil companies gained with the price of crude. BP Plc, the third-largest publicly traded oil company, rose 27.5, or 4.9 percent, to 588.5. Royal Dutch Petroleum Co., owner of 60 percent of the second-largest oil company, gained 64 cents, or 1.1 percent, to 60.2.
FT-SE Slumps
The Dow Jones Europe Stoxx 50 Index, which tracks companies valued at a combined 2.1 trillion euros, slumped 6.1 percent to 3178.23 points. The U.K.'s FT-SE 100 Index fell 5.7 percent to 4746.0, extending its decline this year to 24 percent, and reaching the lowest level since Oct. 8, 1998.
Crude oil traded in London rose 5.9 percent to $29.06. Gold rose $14.5 to $286.25 an ounce.
Brazil's benchmark Bovespa index fell as much as 9.2 percent before the suspension of trading after 75 minutes. The real fell to a low against the dollar. Mexico's benchmark stock index fell 5.6 percent to an eight-month low.
Best Regards, J.T. |
