Doubts over Wall St re-opening

A CLAIM by a top federal official that US financial markets are expected to re-open on Thursday was immediately thrown into doubt by the investment community.

Harvey Pitt, chairman of the Securities and Exchange, which regulates the US stock markets, said in a TV interview: 'It is our hope and expectation that the markets will resume operation tomorrow.'

The Nasdaq stock market, best known for trading major technology stocks, said: 'Nasdaq expects trading to resume as soon as possible. We expect to make an announcement later today.'

But the investment community had its doubts that a speedy resumption would be possible. Art Hogan, chief market analyst at brokerage Jefferies & Co said: 'Oklahoma City took a week to get everything going after its bombing and this is probably 10 times worse in terms of physical damage. The national market will want try to get up and going as soon as possible, but bear in mind that there is literally 15 feet of rubble surrounding a lot of access to most of the offices downtown and to get to the New York Stock Exchange is still an arduous process.'

New York Board of Trade chairman Charles Falk said the exchange's backup facility in Long Island City, New York, is not expected to reopen until Monday at the earliest. The exchange trades coffee, sugar, cocoa, cotton and orange juice futures and options.

The electricity supply company said it was unable to estimate when it might be able to retore supplies to the devastated area.

There is a fear that panic could strike when the markets open again. Sung Won Sohn, chief economist at Wells Fargo, said the terrorism came at an especially dangerous time, with US markets battling the first bear market in two decades. 'Once the market opens, there could be a stampede of selling,' he said. The attacks made a global recession 'highly likely,' he said. Central banks including the Federal Reserve would have to cut interest rates aggressively to boost shaken confidence.

Stanley Nabi, a managing director at Credit Suisse Asset Management. 'I think we have certified for all practical purposes a recession as a result of this with the market being as fragile as it is. There are two reasons. The first is psychological. Obviously, this is a blow. The second is fundamental. This will mean the slowdown will accelerate into a recession of some substance.'

Alan Greenspan, the Federal Reserve chairman who was stranded in Europe by the closure of US airports, issued a statement saying the central bank would provide adequate money to tide banks over during the crisis. The statement was similar to one which helped steady nerves during the market crash of October 1987.

The attack also came at a fragile time for the US economy, which has been struggling to emerge from a 10-month long slump despite seven interest rate cuts since 3 January. Some experts said the attacks could fracture consumer confidence, considered crucial to recovery. Signs of panic, including petrol queues in some cities amid the doubling of petrol pump prices, were 'dangerous,' analysts said.

'This will accelerate the weakening of the US economy,' said John Hock, chief investment officer of Altrinsic Global Advisors. 'This is uncharted territory, but the immediate reaction overseas is even greater than domestically as people's tolerance for risk deteriorates.'

Professor Jeremy Siegel, Professor of Finance at the Wharton School of Business, said the attacks could be 'a watershed event.''This is a major, major act of terrorism that will have widespread economic consequences,' he said.

While officials struggled with the human toll and the impact on the financial infrastructure, experts said the insurance industry would be among the first hit by the fall-out from the destruction. 'When you draw comparisons with other man-made disasters in US history, this will be the largest,' said Candysse Miller, a spokeswoman from the Insurance Information Institute in Los Angeles.

Airlines and hotels could suffer also as Americans cancel bookings in the wake of the attacks. Retail chains could take a knock from consumers cutting their spending plans amid the uncertainty.

One possible impact in Washington would be that Bush, who has been pushing for more tax cuts and increased defence spending, could get his way, analysts said. Budget restraints would likely be abandoned in the crisis atmosphere, breaking a gridlock between Republicans and Democrats in Congress.

© Associated Newspapers Ltd., 12 September 2001

http://www.thisislondon.co.uk/dynamic/news/business_story.html?in_review_id=456616&in_review_text_id=407578

-- Martin Thompson (mthom1927@aol.com), September 12, 2001

Answers

I agree with the Wharton School of Finance Prof -- this is a watershed event -- as to its effects on the economy.

-- RogerT (rogerT@c-zone.net), September 13, 2001.