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Programme highlights Tuesday, 13 March, 2001, 15:06 GMT
Global markets fall as investors pull out
Stock Market
Are world markets precipitating economic meltdown?

The Financial Times 100 Share index fell again this morning - by lunchtime it was down a further 64 points - or 1%.

It's the same story across Europe: in Paris, the market was down 1.6%, Frankfurt fell by 1.5% - adding to even bigger losses yesterday. Struggling Turkey suffered a 6% slump.

But the contagion of economic uncertainty is global in scale, and today's losses will add to the startling figures seen in recent months.

On March 10th last year, the high-tech Nasdaq Index in New York reached 5,048. Since then it's dropped by almost two-thirds, and yesterday lost another 6 percent, dipping under 2,000.

The Dow Jones Index fell 4% yesterday, the Hang Sang in Hong Kong dropped 3.3%, Singapore lost 3.6% and Sydney had its worst one-day fall since last December.

hong kong traders
Exhausted traders taking a break in Hong Kong

On average, world markets have lost one-fifth of their value in the past year - which means that the average shareholder has seen his or her wealth slump by the same amount.

Over half of all Americans own shares, twice as many as in 1987 - the year of the last great stockmarket crash. Even countries like Germany have seen a rapid increase in share-ownership to British levels of 20%: 12 million people own shares here in one form or other.

That's a significant factor in the current crisis.

As stockmarkets strip companies of their value, shareholders watch their savings drain away and cut back their spending accordingly.

The drop in consumer demand has in turn damaged company results, and made it harder to justify investment, let alone expansion - as well as putting further pressure on share-prices.

It's the sort of vicious circle that leads to recession: but is the stock-market crisis justified by what's happening in the real world?

This bear market is not just a case of irrational sentiment - with investors losing faith in ever-climbing stocks and shares.

The downturn of confidence may have begun with the dotcom companies, and the telecom companies which paid a fortune for mobile phone licenses, but it has now touched most sectors of industry and business.

In all, the Economist magazine estimates that four trillion dollars have been removed from company values around the world.

A sharp downturn in America and deep economic gloom in Japan would have produced an unstable situation anyway: profit warnings from big, solid companies like Ericsson - whose announcements helped spur yesterday's falls - are a sign of the deeper problems.

The City's Nicola Horlick
Yet in this country, there remains a measure of confidence that the worst can be avoided. Nicola Horlick, the Managing Director of SG Asset Management, told me that she "doesn't see a major crash happening" on the FTSE.

And Ms Horlick believes that the right response to the current situation - is not to sell shares, but to buy, and hope that Europe's reasonably strong growth leads the world back from the brink of recession.

Nicola Horlick
Stock market growth to be relatively low
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