World Markets Reel Following US Tragedy

by Carla Johnson, Investors Offshore.com

13 September 2001

As America reels in the wake of the unprecedented tragedies in Washington DC and New York, effectively the financial capital of the world, it is rapidly becoming clear that panicked investors and unstable global stock markets are doing little to ease the tension.

Trading on the NYSE, Nasdaq, and American Stock Exchange was halted soon after the incidents, and these and other regional exchanges in the US remained closed all day yesterday. As a result, it was the European and Asian markets which took the brunt of the selling activity, prompting very real fears that the US economy could be tipped into recession, dragging many other world economies in its wake. 'The initial reactions of the European markets Tuesday illustrate how the US markets will respond to this disaster when they open again,' said Dan Ascani, president of market research firm GMSTechstreet. 'The stock market is already very vulnerable and this adds another element of uncertaity.'

According to reports from exchanges where trading did take place on Tuesday and Wednesday, there has been a rush on commodities and 'safe' investments such as gold, and government bonds, in anticipation of further prolonged trouble between the US and the Middle East. Speaking to the Financial Times about the sharp drop in trading of exotic financial instruments such as futures, one trader said simply: 'It's get out of the way time.'

Meanwhile, brokers and other finance professionals are warning investors that panic-selling could exacerbate the already volatile situation. 'In a horrible situation like this, the first reaction is to sell,' said Kieran Murphy, analyst with BCP Stockbrokers in Ireland. '[But] this has been proven time and time again to be absolutely the wrong decision.'

Despite the clear need to soothe troubled investors, and the clients of destroyed banks headquartered in the World Trade Center, the financial sector in America has itself suffered a tremendous loss, and there is an overwhelming feeling that it is too soon to be examining the financial implications of Tuesday's horrific events. 'Right now, it's too early to even broach that subject,' said Russell Sherman, a spokesman for investment bank Bear Stearns. 'It just all pales in comparison, doesn't it?'

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