New York jittery as early market gains evaporate

After a day when international stock markets rallied strongly and clawed back much of the losses sustained earlier this week, the US market signalled late yesterday that nervous trading lies ahead by losing the bulk of its early gains. The Dow Jones Index of US shares closed just slightly higher, gaining 8 points to just over 7506, having earlier climbed by more than 100 points in the wake of positive comments from Federal Reserve Board chairman, Mr Alan Greenspan. Earlier, an overnight rally in Asia and a strong opening on Wall Street had helped to calm jittery investors.

The Dublin market took confidence from the firmer international tone, with share prices recovering strongly across the board. By the end of trading yesterday, the ISEQ index climbed 175 points to close at 3,717.75, up 5 per cent on the day, but still leaving the market some 2 per cent off last Friday's closing level.

Dealers were kept busy with most reporting strong buying interest throughout the day and most analysts are now optimistic that the Irish market could be beginning to steady up for some time. Few, however, are prepared to predict that the turbulence has gone away for good.

"It is now crucial to watch to see what happens in Hong Kong. Everyone will be looking to see if it can make gains or even finish unchanged on the day (today), which would restore a huge level of confidence," according to one dealer. "But we should understand that things are not settled in the Far East yet."

The leading Irish stocks managed to recoup much of their earlier losses, with Bank of Ireland making the most spectacular recovery, adding 140p to close at 848p. Trading volumes were also stronger, with more buyers emerging in the market.

The rebound in world stock prices gathered steam after Mr Greenspan said the recent turmoil in financial markets would eventually be viewed as healthy.

The Federal Reserve chairman, who is viewed as one of the world's most powerful central bankers, also told US Congress that the currency turmoil in Asia that wreaked havoc on world stock markets would only have a modest impact on the US economy.

His comments immediately sent the Dow Jones industrial average up 120 points, or about 1.6 percent, in early trading, building on Tuesday's record-breaking rally. However, it later lost these gains amid continued nervousness about the outlook for Asian markets and over the valuation for US stocks. Mr Greenspan's comments, while viewed as fairly neutral, still helped to restore some calm. Cantor Fitzgerald's chief analyst, Mr Bill Meehan said: "It is the best we could have hoped for. It is certainly enough to keep markets calm . . . and it should soothe the jangled nerves of investors who pulled money out of Asia."

European stocks, which had been higher ahead of Greenspan's speech, rose again after his remarks. Britain's FTSE 100 index rose 2.5 per cent, the French CAC-40 index advanced 6.3 percent, and Germany's DAX index jumped 6.3 per cent.

European markets took their lead from Asia, where Hong Kong's Hang Seng index closed with a 19 per cent gain, and Japan's Nikkei index of 225 stocks rose a more modest 3.3 per cent.

The day's main economic report showed that US orders for big-ticket durable goods fell 0.6 per cent last month, the first drop since May, but in line with expectations.