Uneasy New York sees Dow slide

A rally in stocks on both sides of the Atlantic has fizzled out as late selling eroded gains made after a recovery in Hong Kong calmed global financial markets badly shaken by the Asian territory's stocks crash.

By late yesterday US shares were falling again, hit by renewed nervousness about the outlook for Far Eastern markets and the Dow Jones closed down 132.36 points or 1.69 per cent on 7,715.41, following on from its 187-point fall on Thursday.

US technology stocks tumbled, dragging the broader market with them, on worries that a slowdown in Asian economies would hurt demand for computers, chips and other high-technology gear.

The stocks of chip makers suffered the most after Intel said it would delay opening a plant in Texas. That, combined with the fears about Asia, delivered a double dose of bad news for semiconductor manufacturers and the equipment makers who supply them, traders and analysts said.

London and Paris closed with losses after surging earlier on the strength of Hong Kong's rebound, and New York saw its 1 per cent initial gain turned into hefty losses. In Dublin, share prices also fell back in late trading and the ISEQ index finished down 6.08 points at 3,821.10. The rally in world markets, fuelled by Hong Kong's recovery from its 10 per cent plunge on Thursday, was fragile. Many European and American investors were nervous as most Asian markets, apart from an ebullient Tokyo, drew only modest relief from Friday's jump in Hong Kong shares.

The Hang Seng Index closed 718.04 points or nearly 7 per cent higher at 11,144.34, its second largest points gain ever.

European and American investors drew little comfort from Hong Kong's stronger performance and remained wary about its volatility. In London, the FTSE 100 Index ended down 21.3 points at 4,970.2, finishing five days of volatile trading with a loss of 300 points, or 6 per cent. On Thursday alone, it shed 3 per cent. "Three hundred points down looks like a fair comment on the week," said NatWest strategist, Mr Bob Semple.

"Asia continues to be a source of tension. We've had a dead cat bounce in Hong Kong and people seem a bit happier about whether the peg (of the Hong Kong dollar to the US dollar) will hold but worries over Hong Kong property values won't go away that quickly," he said. Frankfurt floor trade, which finished before Wall Street opened, closed up nearly 2 per cent but transactions on the after-hours, computerised IBIS index were only just in the plus column in late trade.

Paris began the day with a healthy recovery on the back of Hong Kong but the rally ran out of steam.