Markets rattled by Milan plane crash

US stocks recovered soon after the initial drop

Stock markets in the US and Europe fell sharply on Thursday following reports that a light aircraft had crashed into a tall building in Milan, Italy.

New York's Dow Jones index initially dropped 80 points, or 1%, but recouped losses to trade just 0.4% lower at about 1700 GMT.

All of a sudden, it got very quiet on the trading floor

New York trader Robert Basel

In Europe, Frankfurt's Dax fell more than 2% before recovering to close just over 1% down on the day.

The regular trading day in Milan had already finished but after-hours electronic trading was suspended, the Milan stock exchange said.

The euro fell from near three-month highs against the dollar.

Gold - seen as a safe haven investment in times of uncertainty - surged to two-week highs before subsiding as speculation that the Milan crash was a terrorist attack diminished.

Investors recovered their composure after the Italian authorities said the crash appeared to be an accident.

TV watching

News of the crash had revived fears of further airborne attacks, following the events of 11 September last year.

"If it is an accident, it shouldn't have a lasting effect on the market. If it is not accident, then that's another matter," said a senior analyst working for an Italian bank in Milan.

Many of the world's major stock markets were closed at the time of the crash, but the incident unnerved investors in the US.

"All of a sudden, it got very quiet on the trading floor, then we were looking to the TV for a little guidance," said Robert Basel at Salomon Smith Barney in New York.

Airline stocks were among the steepest fallers on US markets.

AMR Corp, parent company of American Airlines, lost 4% and US Airways shed 6% on the day it reported widening losses.

Before after-hours trading in Milan was suspended, national carrier Alitalia slipped 3% while Telecom Italia Mobile declined 2%.