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World markets hit war fear Original Source Link: (May no longer be active)
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2003/03/08/cnstox08.xml&sSheet=/money/2003/03/08/ixcity.htmlhttp://www.telegraph.co.uk/money/main.jhtml?xml=/money/2003/03/08/cnstox08.xml&sSheet=/money/2003/03/08/ixcity.html
World stock markets hit by war fever
By George Trefgarne, Economics Editor (Filed: 08/03/2003)
War nerves sent world equity markets gyrating wildly yesterday, as anxious investors fretted over the diplomatic situation and how soon a conflict with Iraq might come.
In London, the FTSE 100 index of leading shares plunged 88 points to 3467 by lunchtime, coming within a whisker of its lowest level since 1995 and half the 6930 peak reached on the last trading day of 1999.
Then US television news network CNBC reported that Osama bin Laden's sons had been captured and the news swept through febrile dealing rooms. The index began to recover, ending the day down 63.8 at 3491.6.
Wall Street was also cheered by the reports and by the time London closed, the Dow Jones index had turned a 111-point fall into a 39-point gain and was trading at 7713. It later closed up 66 at 7740.
Michael O'Hare, a senior trader at Lehman Brothers in New York, said: "Everything is hinged on anything related to terrorism. Anything positive and the market's going to fly. Anything negative and it's going to drop."
One of the biggest decliners in London was WPP, the advertising giant. It lost 16.5 to close at a four-year low of 351.75p, amid fears that the media is suffering another big drop in advertising as businesses delay spending in the face of uncertainty over Iraq.
Lorna Tilbian of Numis Securities said: "Advertising is the ultimate confidence indicator and there is massive uncertainty out there. Companies are deferring spending just as people are in their own lives. But if the war is short and sharp, I think sentiment could recover quite quickly."
Royal & Sun Alliance was the largest faller of the day in the FTSE 100 and now seems certain to be evicted from the index after Tuesday's review. Invensys has all but booked its place in the FTSE 250, and based on last night's closing prices, the pair would be joined by Rolls-Royce and British Airways in being demoted.
Kelda Group, Provident Financial, Cable & Wireless and Foreign and Colonial Investment Trust are likely to be the four to replace them in the blue-chip index.
Sentiment is now so bad in some parts of the City that some economists are starting to predict that Britain might have a recession. Richard Jeffrey of Bridewell Securities said: "If we escape recession over the next 18 months, it will be more by luck than judgment."
The stock market falls began early in the morning in Tokyo after President Bush made clear he is determined to deal with Saddam Hussein as soon as possible, even if the United Nations is not prepared to pass a second resolution.
The Nikkei index of leading shares dived more than 2pc, or 225.03 points, to close at 8144.12, its lowest for 20 years.
By the time Europe opened, the mood was extremely gloomy and the Dax index in Germany slumped 60 points to a seven-year low of 2427. The declines were led by German banks, which are weighed down by bad debts.
One German bank, West LB, might close its equity division in London after a board meeting next Tuesday, with the loss of more than 200 jobs.
Traders were also buffeted by news that American unemployment is rising at the fastest rate since the 2001 terrorist attacks, as revealed by government figures yesterday.
The figures show that 308,000 jobs were lost in February, worse than economists were expecting, taking the US unemployment rate to 5.8pc.
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