Booms and busts on the UK market

BLACK MONDAY, 19 OCTOBER 1987

The stock market had been soaring for six years and there was a growing fear that shares were overpriced.

The downturn, though, was more violent than anyone expected.

Stocks slumped 9.1% on Monday and then plunged 11.4% on Tuesday.

Analysts blamed it on "portfolio insurance", a new trading strategy that failed to work, which prompted panic among investors.

On This Day: Shares plunge after Wall Street crash

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INTEREST RATES SOAR, AUGUST - SEPTEMBER 1992

The market plunged as the government attempted to keep the British pound in the European Exchange Rate Mechanism (ERM).

The chancellor increased interest rates to 15% and the stock market slumped.

But the efforts were in vain. The government was forced to abandon the ERM on 16 September 1992.

UK crashes out of ERM

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HEDGE FUND COLLAPSES, RUSSIA CRISIS, JULY - OCTOBER 1998

Long Term Capital Management (LTCM) was supposed to be the investment fund that could not fail.

The brains behind it included two Nobel prizewinners.

Unfortunately for them, the Asian financial crisis in 1997 destroyed the fund's investment model.

LTCM's borrowing threatened the stability of the US banking system. Investors panicked and an emergency bailout had to be arranged.

The market was further upset by Russia's financial crisis and its refusal to pay interest on government debt.

Wall Street rescue for hedge fund

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DOTCOM BUST, MARCH 2000 - 2003

During the dotcom boom, many investors were persuaded that profits did not matter.

Internet-based firms with no proven track record raised millions of pounds by selling shares.

Big European phone companies spent billions of dollars on hi-tech, or 3G, phone licences.

Technology stocks hit a peak in March 2000 and investors began to sober up.

From that peak, the market dropped more than 50%, touching bottom in 2003.

Dot.com timeline 1969-2002

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TWIN TOWERS ATTACKED, 11 SEPTEMBER 2001

The attacks in New York and on the Pentagon triggered huge losses for shares in London. The FTSE 100 index fell 5.7%, still the fourth-biggest one-day loss.

Market turmoil after US attacks

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CREDIT BOOM, 2003 - 2007

The UK economy enjoyed four years of healthy growth, helped by a strong performance in the US and the rise of India and China.

Low interest rates fuelled a surge in property prices, encouraging consumers to go out and spend.

The financial services industry in the UK also boomed and London challenged New York as the world's financial capital.

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SUB-PRIME BUST, JANUARY 2008

The US property market went into a slump, prompting fears that the US economy might be heading into recession.

It also emerged that US banks had made huge losses on investments backed by mortgages made to homeowners with poor credit histories, known as "sub-prime" loans.

Those fears reached a peak on 21 January 2008, resulting in a 5.5% slump for the FTSE 100 index, its worst one-day fall in more than six years.

Full credit crunch coverage

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