Stocks slashed as panic hits

New York's traders could only watch as share prices plummet

US and European stock markets recovered slightly from deep lows hit during volatile trading early on Friday, but losses for the week remained large as investor sentiment remained depressed as the wave of mass layoffs in aviation and other industries heightened fears of a global recession.

As Europe's traders went home for the weekend, shares there clawed back some of the day's earlier losses, while in the US share prices stabilised after rising back from sharp falls in early trading.

But on both sides of the Atlantic, most markets ended well below their opening prices on Friday with extensive losses for the week.

US markets close

Dow Jones:
Down 1.62% or 136 points at 8,240

Nasdaq:
Down 3.21% or 47 points at 1,423

S&P 500:
Down 18 points at 966

The UK's FTSE 100 index was down 330 points, or 7.2%, on the day at one point, hitting its lowest levels for almost five years, but recovered slightly to close down 2.7% on the day.

In the US, shares opened sharply lower - with the Dow quickly down more than 3% - but prices climbed in late morning trading to stabilise above early lows.

Shares in Europe also hit fresh lows on Friday but Frankfurt's Dax surged in late trading to erase the day's losses while the Paris Cac 40 index pulled back to close down 2.28%.

Ifo worries

The pressure on shares in German companies had earlier intensified after the release of the monthly survey of the business climate by the Ifo economics institute.

Europe's markets at 1646 GMT

Frankfurt: Dax
Down 1 point at 3,809

Closed:

London: FTSE 100
Down 123 points at 4,434 (closed)

Paris, Cac 40
Down 85 points at 3,653

Tokyo's Nikkei 225 down 230 points to 9,555

Hong Kong's Hang Seng down 384 points to 8,934

The latest figures for German companies' expectations of future performance showed a slight decline, nearing a five-year low.

The survey period ran up to mid-September, thus including the first few days of reaction following the attacks on the US on 11 September.

But analysts said the survey was effectively void, and that the situation was likely to get worse.

"There is a lot of uncertainty in the figures because part of the replies came in after the attacks," said Andrew Snowball, of Julius Baer Investments in Frankfurt.

"August is probably a void month because the index reflects a different world.

"I expect that the business expectations index will be significantly lower next month."

Insurance in trouble

Among individual shares, stock in German reinsurer Munich Re fell after admitting that its liabilities stemming for last week's terrorist attack on the US would be at least double previous forecasts.

Shares in France's Axa were also being sold heavily, down 6%, while stock in manufacturing companies including carmakers Renault and Porsche faced similar sell-offs.

In London, Friday was the day the recent reshuffle of the FTSE listings took effect.

Ahead of time, some analysts had predicted that this would spark some buying of stocks which are entering the blue-chip FTSE 100 index.

But others said the effects are likely to be limited at best, and the expiry of index futures and options during FRiday was further weighing on sentiment.

Lay-offs hit confidence

The vicious circle of stock sell-offs gathered speed as concerns about the health of airlines, now suffering with sharply rising insurance costs as well as a decline in passengers, undermined US stock markets on Thursday.

Impact of attacks

US: Dow Jones
-14.5%

US: Nasdaq
-16.2%

London: FTSE 100
-12.1%

Paris: Cac-40
-16.7%

Frankfurt: Dax
-19.8%

Tokyo: Nikkei 225
-7.1%

Figs: Close of trade 10 Sept (11 Sept Tokyo) to 1545 GMT 21 Sept

Analysts also fear that High Street spending - viewed as the major prop of major economies in recent months - is poised to decline as the effect of redundancies knocks consumer confidence.

In the US on Thursday, dealers initially hoped that a tub-thumping speech delivered by US President George W Bush to a packed joint session of Congress could help in triggering a patriotic rally in the US at least.

But there was no such revival in Asian shares, where the ongoing uncertainty continued to dog sentiment.

"We are not looking for good news at the moment," said Adrian Foster, senior economist at Nomura Securities in Singapore, where the main index fell nearly 5%.

"We pretty much take it for granted that these markets are going to get absolutely slammed."