Storm in the dealing rooms, storm outside

Don't Panic.

It was one of the strangest weekends London has ever seen.

Early on Friday morning the worst storms in a century careered across the South East, through the capital and out across the channel.

Three days later, on Monday morning, City workers struggled into town, only to watch in disbelief as one fifth of share values were wiped off stock markets around the world.

That day, 19 October 1987, came to be known as Black Monday.

Ten per cent was knocked off the value of shares at the London Stock Exchange, followed by another 10% the following day.

But why did it happen?

"People talk about the market being ruled by greed and fear, and clearly we saw greed in the first nine months of the year, and fear in October 1987."

Philip Coggan of the Financial Times says there was no one reason for this spectacular fall, but it was the beginning of the end of yuppy-dom.

"There was a sharp fall in the sales of Porsches; there were suicides in the wake of Black Monday and many workers were ruined, never to work in finance again.

"It was sheer panic," recalls stock market historian David Schwartz. "Many people thought the end of the world was here."

Irrational actors

Mr Schwartz believes that there was a certain inevitability about Black Monday.

"We knew it was windy. We knew it was bloody windy. What I didn't know was that it was [that] windy"
Met office official

The market had risen too high too fast, and new technology fed the panic selling.

Programme trading, the use of computers to automatically buy and sell shares when prices reach a certain threshold, was a new innovation on Wall Street.

Today such automated transactions are more tightly controlled.

On Black Monday fewer such safeguards existed.

What most analysts can agree on is that, whilst market mechanisms are efficient, the people who buy and sell are not.

They follow the herd, they get obsessed with numbers, like 6,000 on the FTSE, and they make nonsensical decisions.

"The stock market isn't a rational place," says Mr Coggan.

"To fall 22% in one day makes no sense at all."

Perhaps the most bizarre statistic of all is that, by January 1988, the markets were roughly back to where they had started from 12 months earlier.

Black Monday did not lead to an instant recession and did not appear to have any long-term repercussions.

Unpredictable events

And what of the storm?

Was it a bizarre coincidence, or did it actually affect the smooth running of the City?

If the capital's stockbrokers and traders had got to work on the Friday, might the crash of the Monday been slowed or even averted?

The only certainty today is that, like the crash, few saw it coming.

As one Met Office forecaster put it at the time:

"We knew it was windy. We knew it was bloody windy. What I didn't know was that it was [that] windy."

In Living Memory will be broadcast on Wednesday 24 May at 1100 on BBC Radio 4.