London Telegraph: Fears of a crash in worldwide marketsgreenspun.com : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread
Nasdaq crash wipes billions from fortunes By Grant Ringshaw
DEALERS in London and other European financial markets are bracing themselves for a massive share sell-off tomorrow amid fears of a crash in world stockmarkets.
A week-long slide in American stock markets turned into a meltdown on Friday creating panic over the weekend and raising the spectre of the October 1987 crash. An early indication of the possible future panic was provided yesterday by the Taiwan stock market, one of few open, which plunged by 5.4 per cent. Even before the US crisis, London's techMARK index of technology stocks had fallen by almost 10 per cent over the week.
On Friday the Nasdaq index, which has been at the heart of the US bull market, plunged 355 points or 9.66 per cent. The frenzy of selling ended the worst week in the 30-year history of Nasdaq as it lost more than 25 per cent of its value. As prices tumbled, many who bought stocks with borrowed money were forced to sell to repay loans, accelerating the downward spiral.
The cream of the world's technology rich list, including Bill Gates, the chairman of Microsoft, have seen tens of billions of pounds wiped off their personal fortunes as Wall Street slumped. In the past week the value of Gates' personal stake in Microsoft, the American software giant, has been slashed by $11.1bn. His stake is now worth $55.2bn. Technology shares bore the brunt of the spectacular sell-off which led to a record daily points fall in the Dow Jones Index of 616 points or 5.6 per cent.
Hundreds of UK entrepreneurs and investors who have made their fortunes through internet ventures are now watching the fate of their US counterparts. Besides Gates, other big losers include Charles Schwab, the chairman and joint chief executive of the eponymous broking company, who lost $2.6bn. Jeff Bezos, the founder of Amazon.com, the world's biggest online book retailer, is also nursing astonishing losses of $2.4bn after Wall Street was hit by panic selling on Friday night.
Michael Dell, the founder of Dell Computer Corporation, saw shares in his company hammered by nervous investors and ended the week $2.2bn poorer. Jerry Young, the head of Yahoo!, the internet portal, lost $1.6bn, while Stephen Case, the chairman of American On-Line, the internet service provider-to-media company, saw his personal wealth plummet by a mere $122.4m. Ned Riley, chief investment strategist for State Street Global Advisors said: "We had a semi-panic, almost a full cascading deterioration. The real question is, have we reached the nadir of emotion?"
The historic US markets slump on Friday came after investors took fright at a surprisingly bad set of inflation figures. These showed that last month American consumer prices recorded their largest jump in five years. Equally worrying was the fact that in the first three months of this year core prices rose at an annual rate of 3.2 per cent - the fastest rate of growth for more than six years and double the rate the market had expected. The figures have reignited fears that the US Federal Reserve Board will have to raise interest rates aggressively when it meets on May 16 to dampen down the frenzied rate of economic growth, prompting the UK to follow suit.
Economists suggest that any rise in American rates would lead the Bank of England to follow swiftly and push up British rates. On Friday evening Mervyn King, the Bank's deputy governor, hinted that an early rise in rates would be needed after evidence that the UK economy was growing at well above its sustainable level. He said, in a speech in Plymouth: "The longer the correction is left, the sharper the adjustment will be."
Trevor Greetham, Merrill Lynch, global strategist said: "The markets are beginning to realise that the technology/media/telecoms story has an economic growth angle to it. If tentative signs that the world economy is peaking then the underperformance of these sectors would be likely to continue."
-- Carl Jenkins (Somewherepress@aol.com), April 16, 2000