Recession fears follow US horror

One City analyst is reported to have said:’If the US was on the brink of recession, and may have avoided it before, now they will not avoid it.’

In America, analysts and brokers are said to be preparing for the worst and economists have said they expect the Federal Reserve to cut interest rates to help the world economy recover from the terrorist attacks.

Carl Weinberg, chief economist at High Frequency Economics, said people should expect ‘a lot of volatility in the financial markets over these next few days and weeks as events unfold.’

The financial impact of the attack, which destroyed the World Trade Centre , as well as part of the Pentagon, killing an untold number of people, has been compared to the Gulf War, which plunged the US into an economic recession in 1990.

Some of the US’s biggest financial services companies had personnel in the WTC and adjacent buildings. Morgan Stanley Dean Witter said its key focus was on accounting for 3,500 of its employees that worked in the building. Credit Suisse First Boston said it had 1,000 people in a building next to the WTC. Government bonds broker Cantor Fitzgerald has the same number working at its headquarters in the building.

Merrill Lynch, JP Morgan, Lehman Brothers and Oppenheimer funds also had staff in the vicinity of the disaster.

In London banks and financial institutions have returned to normal business. Operations At UBS Warburg, which houses the world’s biggest trading floor, have resumed as usual although things are expected to be quiet. Only the Bank of America has closed its doors.

In Europe today markets recovered some ground, with London, Paris and Frankfurt all up by almost 2% in quiet trading, still far below opening levels before the disaster struck.

The biggest gainers have been oil stocks and gold shares. The price of gold has risen by almost $20 to $290, while oil climbed by $3,60 to $31.05 a barrel after the attack, up by more than 13%. Travel companies, airlines and insurance companies are expected to suffer heavy falls in their stock prices.

Yesterday the FTSE-100 fell by almost 6%, the biggest fall since Black Monday of 1987 as the index lost £70bn of its value. Paris?s benchmark index, the CAC 40 lost more than 7% of is value and the DAX tumbled by 8.5%

In Asia stock markets tumbled heavily, with the Nikkei falling more than 6% to a 17-year low, while the Hang Seng in Hong Kong lost almost a tenth of its value plummeting by 9%.

American markets remain closed for today at least, although reports from across the Atlantic said that financial institutions including banks would remain operational.

In Brighton the Trade Union Congress has been adjourned.

An emergency session of parliament has been scheduled for sometime this week. The last time such a meeting was scheduled was in 1990 after Iraq invaded Kuwait to spark off the Gulf War.


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