US shares in fresh plunge

Steep falls are becoming a wearily familiar sight

Shares in New York have slumped again to levels last seen shortly after terrorists flattened the World Trade Center on 11 September.

After a brief rally on Monday, US shares turned sharply down at lunchtime on Tuesday, ahead of a crucial meeting of the US central bank, the Federal Reserve.

European share markets, which boasted a recovery of their own, are expected to follow suit when trading begins on Wednesday.

The Dow Jones Industrial Average fell 155 points to 9,133, and the tech-heavy Nasdaq index dropped by 2.5%, or 36 points, to 1424 - just one point above its low of 1423 after the terrorist attacks.

Policy fears

The horrific attacks on New York and on the Pentagon in Washington DC triggered a worldwide selloff, before a bouncebank which began in November last year.

Weak corporate results and uncertain economic data since then now makes earlier hopes of a rapid, solid US recovery look like false optimism.

Although the Fed was not expected to raise interest rates from their 40 year low of 1.75% immediately, traders were worried about signals which might indicate that a rate rise was imminent.

And more instability was added by the news that the Treasury has had to cancel its two-year bond auction, because Congress has refused to authorise an increase in the Federal debt ceiling despite dire warnings from the US Treasury Secretary, Paul O'Neill, that the government would run out of money at the weekend.

Also spooking the market has been the relentless slide in the value of the dollar, now almost at parity with the euro despite a brief rally on Tuesday, and the deepening worries about the fragility of the US recovery.

US consumer confidence dropped on Tuesday by the the biggest amount since September 11, with consumers particularly worried about the future outlook for jobs.

US unemployment has risen from 4% to 6% in the past six months.

Battered bourses

Shares were down in all major tech sectors, with networking, computer software and biotech leading the way.

Shares in Amazon, the world's biggest internet retailer, fell sharply after rival Buy.com announced it would undercut Amazon's book prices by 10%.

And shares in transporation stocks were depressed after delivery company FedEx warned of lower profits to come in future quarters, despite a doubling of profits in the current quarter.

With confidence in many companies shattered by the Enron scandal, many former high-flyers like WorldCom are trading at historic lows.