Stock markets' torrid week

Dow Jones: -14.3%, Nasdaq: -16.1%, S&P 500: -11.6%

The stock market turbulence that was set off by last week's terrorist attacks in the US gave shares a serious beating this week as traders' concerns grew about the consequences of the US response for the world economy.

"It has been one-way traffic in the equity markets this week and the direction is unlikely to change until the American military response to the terrorists' attack is known," said the fund manager Gerrard strategist Mike Lenhoff.

The US market suffered its largest fall since the 1930s depression, with its leading stock index suffering a 14% slump during five days of trading following the attack on America.

In the UK, the leading share index fell about 7% during the week.

Oversold?

Severe falls indeed, though in the end the damage to share prices turned out to be less serious than some traders had feared during Friday's panic when historic lows were hit in most major markets.

Monday...

"Right now, there are just falling knives everywhere," said CH Dean & Associates fund manager Dirk van Dijk.

"Who the hell wants to stand in front of a freight train? On Monday, we did some buying. Clearly, we were immature."

But others felt that the market's reaction was exaggerated, though few were willing to predict an imminent recovery.

"The market is oversold, but there is always an intangible factor to stock prices and an irrationality that they can reflect. You have to let it run its course," said Legg Mason Wood Walker's chief market strategist Richard Cripps.

"When people say 'when the first shot is fired then we will go higher,' that's all nonsense because this situation has never existed before," said DZ Bank's Patrick Thielmann.

Recession fears

Further negative news was poured onto the markets as US traders started the weekend, many of them already preparing for next week.

Tuesday...

Two separate surveys, one by Reuters, the other by the National Association of Business Economics (NABE), said both Wall Street finance houses and US economists now agree: The US is in a recession already.

"An overwhelming majority of 21 NABE member-economists surveyed over the past two days concluded that the events of 11 September have triggered a recession," said the association's president Harvey Rosenblum.

"The US economy has slipped into a recession, and following last week's attacks, growth will not resume until the first half of 2002," a Reuters poll of leading Wall Street firms concluded on Friday.

In Europe, recession fears were defiantly dismissed by European Union member states' finance ministers who are meeting over the weekend.

"We're not in recession and we're not going into recession," said the monetary affairs commissioner Pedro Solbes Mira.

Tragic week

But Europe's stock markets have suffered badly this week too, just as the US ones have.

Wednesday...

Over the week, the French index slipped 6.58% and it has lost more than 16% since 11 September when the US was attacked.

The German index has fallen 21% since the attacks.

In the UK, the index fell 7% during the last five days of trading.

In the US, the Dow lost 14.3%, the technology heavy Nasdaq index fell 16.1% and the broader Standard & Poor's 500 index slipped 11.6% during the week.

"You can't get a historical parallel. We are boxing with a ghost," said Mr Cripps.

Friday panic

The FTSE 100 index of leading UK shares closed at 4433, down 2.7% during Friday and down 465 points from Monday's close; almost a tenth of the value of UK's leading companies lost in just a few days.

Thursday...

But compared to last week's close of 4,755, the FTSE closed just 322 points lower, down about 7%.

Lunchtime trading in the UK and Europe painted a much gloomier picture of the stock markets, with Frankfurt, Paris and London all trading at lows not seen for several years.

At some stage during the day, the FTSE traded 7.2% below its morning opening, having slipped 337 points to levels last seen in January 1997.

Bouncing back

Similarly, in Germany the Dax index of the leading 30 shares fell almost 7% in morning trading to 3,539, a level not seen for almost four years, before bouncing back close to where it begun the day.

TGI Friday

In Paris, the Cac 40 index fell to 3,463 during the morning - a level not seen for almost three years - before bouncing back to close down 2.28% on the day at 3,652.

Japan's performance followed a similar pattern on Friday, with the Nikkei index falling to 9,382.95, a level not seen since late 1983, before crawling back up to close at 9,554.99 points, 2.35% lower since trading started Friday morning.