Markets plummet in wake of New York catastrophe

The catastrophic events in New York had a devastating effect on world stock markets, with share prices in some European markets falling by more than 10 per cent at one point as investors flocked into the traditional safe havens in times of uncertainty - gold and oil, and rock-hard currencies like the Swiss franc.

Oil and gold prices rose sharply, bond prices also moved higher as investors moved out of equities on fears that the bombings and possible follow-on atrocities might further reduced consumer confidence and speed up the movement of the US economy from a slowdown to a full-blown recession.

And while the US stock markets have been closed indefinitely, dealers believe share prices in New York are set to fall by at least 5 per cent and possibly much more when trading eventually resumes.

Shocked dealers wondered exactly what would happen when the New York markets reopen, with many Wall Street dealers and strategists thought to have died in the World Trade Centre, the head office for many American securities firms. The implications are huge. What happens now?" said one London dealer.

But another dealer was more blunt about the implications and stated: "Buy oils and sell the hell out of everything else, particularly anything with a US link, exposure to banks, insurance and transport."

Another fund manager said: "Investors will be wondering if this is the start of a terrorist campaign on the US aimed at high-profile institutions."

Oil prices rose by as much as $4 to more than $31 a barrel before weakening in later trading to $29.20, up $1.75 a barrel. Not surprisingly, this movement in oil prices benefited oil companies, with BP gaining more than 4 per cent and Shell more than 2 per cent - with oil one of the few sectors to trade higher in a market which was otherwise a sea of red ink.

OPEC said that the oil-producer cartel would ensure world supplies and ensure price stability. Secretary-general Mr Ali Rodriguez said: "OPEC members are committed to their promises to guarantee sufficient oil supplies."

With transatlantic air travel now at a standstill, the biggest losses were suffered by airline stocks. British Airways, with the biggest transatlantic network, fell more than 21 per cent, Lufthansa was down 14 per cent, while Air France fell more than 16 per cent.

Even Ryanair, with no transatlantic routes, fell 7 per cent on fears that the latest terrorist atrocities will hit travel, even in Ryanair's low-cost European operations. "If you remember what happened in 1991 with the Gulf War, the fuel price went up and Americans stopped travelling," said one airline analyst.

Tourism stocks also fell heavily and on the Dublin market one of the heaviest falls was suffered by the country's biggest hotels group Jurys Doyle, while in the UK Hilton Hotels and Six Continents shares were both down 22 per cent. BAA, the biggest airport operator in the UK, fell 16 per cent.

With the events in the United States likely to result in massive insurance claims, the insurance and reinsurance sector also fell heavily with Britain's CGNU, Zurich and Royal Sun Alliance, the Netherlands' ING and Switzerland's Swiss Re all suffering double-digit losses.

Overall, European markets suffered their biggest one-day losses since the October 1987 crash. In London, more than €100 billion was wiped off the value of British shares as the FTSE-100 index fell 5.7 per cent, its largest one-day fall since. The Dublin market fell by nearly 2.5 per cent with €1.5 billion wiped off the value of shares.

In common with other European markets, the Irish Stock Exchange (ISE) imposed what is known as "fast trading", an emergency procedure that imposes limits within which stock prices can trade. ISE director of trading, Mr Brian Healy, described the measure as "an orderly response to an abnormal situation".

The German stock market was devastated by the events in New York with the benchmark Xetra Dax index down more than 11 per cent at one point, while the French stock market was down more than 7 per cent. The pan-European FTSE Eurotop 300 index fell more than 6 per cent.

But despite yesterday's events and the closure of American markets, European stock exchanges said that they would trade as normal today. A spokesman for the pan-European Euronext exchange said: "We have had other crisis situations in the past, the invasion of Kuwait for example. But the market is made to remain open. To close the markets would add to the panic and so the best decision is to keep them open," a spokesman said.

The London Stock Exchange, which was forced to evacuate its headquarters yesterday as a precautionary measure, said it would open as usual today, as did the Deutsche B÷rse. The Irish Stock Exchange also said trading would resume this morning, adding "we will continue to monitor developments and keep the market informed".

Even before yesterday's horrific events, this week was seen as crucial for the US markets with a batch of key economic data due on Friday.