The curse of Federal Reserve chairman, Mr Alan Greenspan returned to haunt world stock markets yesterday, with share prices plunging after the he gave a strong hint that US interest rates might rise as a pre-emptive strike against inflation.
The US central bank's Open Markets Committee meets next week, and a rate rise may be announced then.
The comments by Mr Greenspan sent bond prices plunging and the yield on the US long bond rising above 7 per cent. The initial reaction on Wall Street was somewhat restrained - at least by recent standards - with the Dow falling 70 points before stabilising. At the close last night, the Dow was on 6820.28, a fall of 57.4 points.
The fears of a rise in US rates were compounded by election fears in Britain and fears that British interest rates might also rise after the general election. In London the FTSE 100 index suffered its biggest one-day fall since last December, with the index losing over 74 points to 4258.1.
Bank stocks took the brunt of the selling pressure, with Lloyds TSB 4.7 per cent lower on the day and Barclays off almost 4 per cent, while Legal & General was the biggest falter among FTSE companies, with almost 6 per cent wiped off its value.
In Dublin, financial shares also fell sharply and over 1.7 per cent was wiped off the value of the market as prices fell across the board. Page 6
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