Blair calls for stock market calm
Shares suffered a terrible collapse today as the FTSE-100 index crashed to a six-year low wiping £52 billion off the value of Britain's leading companies.
Renewed concerns about US corporate scandals triggered the latest wave of selling which took the Footsie down 220.7 points to
3637.3, heading for its biggest one-day fall since 11 September. The index has lost a massive 1043 points since the beginning of the month as share-selling has racked the markets.
But the fall through the 3700 mark was seen as a psychological breaking point: "Today was the first time I've felt the market really capitulating - it's been truly terrible," said one trader.
London's biggest share fallers included information group Reuters and Granada, which both lost 10 per cent of their market value.
"It's depressing watching the boys lose so much money," said Steve Graves, senior trader at stockbroker Gerrard. He believes that the Footsie could fall as low as 3500.
The collapse in share prices has caused serious worries about the British economy as well as the nation's pensions and other savings. Insurance giant Norwich Union has already declared it will have to cut pay-outs on with-profits policies due to share-price losses.
Mike Taylor, senior economist at Merrill Lynch, said: "There comes a point when markets fall so far that you get a sudden fear factor among consumers and they stop spending money. Falls of the magnitude we have seen mean we are now getting into that realm."
However, Tony Blair called for calm over the stock market's rapid decline. His spokesman said: "The Prime Minister believes in the fundamental strength of the British economy.
"We believe that this country is far better placed than many other countries to survive the ups and downs of the stock market."
Executives around the world, though, said in a survey today that collapsing share prices posed a bigger threat to commerce than international terrorism. This week's slides have much to do with a gathering potential scandal around the dealings of Enron, the fallen American energy trader.
A US senate committee is probing a series of transactions between Enron and its lenders, including Barclays and Royal Bank of Scotland, which allegedly hid the extent of Enron's mountainous debts.
The main focus of the probe is on the giant US banks JP Morgan Chase and Citigroup, who investigators claim provided the bulk of the questionable loans through offshore accounts in Jersey.
"People just don't know if they can trust anybody in corporate America any more," said one dealer.
JP Morgan was today claiming it had acted properly throughout the affair, but confidence was again eroded as two of America's one-time corporate heroes were arrested for fraud. Rags-to-riches millionaire John Rigas and son Timothy, respectively the former chief executive and chief financial officer of Adelphia Communications, were arrested for conspiracy to commit securities fraud.
