BBC

hursday, 15 March, 2001, 12:55 GMT Stock markets remain nervous

Japanese banks are coming under intense pressure European stock markets remained nervous on Thursday, despite an unexpected late surge in Japanese share prices.

The rally at the end of trading in Tokyo came despite another day of heavy falls in the US.

By 1245 GMT in London, the benchmark FTSE 100 index of leading shares was up 43 points at 5,669.

In Paris the benchmark Cac 40 was 41 points higher at 5,157 and in Germany the Dax was 50 points better for the day at 5,844.

Tokyo rally

Shares in Japan had earlier staged a late rally to close up 309 points, above the 12,000 mark, after carrying heavy losses for most of the session.

The initial slump followed a warning by a leading credit rating agency, Fitch IBCA, about the debt burden of 19 of the country's banks.

This news, combined with Wednesday's big falls on the US markets and the continuing political crisis in Japan, had pushed the Nikkei index as low as 11,433 - its lowest level since December 1984 - before it closed at 12152, a 2.6% rise.

The turnaround came after a major Japanese banking group issued a statement that it was doubling provisions to write-off bad loans.

Sanwa Bank's one trillion yen ($8.27bn) charge for the current financial year pleased the markets.

It was the first evidence that one of Japan's four mega banking groups is finally prepared to take heavy losses to help clean-up its bad loans sheet.

Japanese banks have vast stockholdings and falls in share prices hit their profits, which they desperately need to offset a mountain of debt.

Opening falls

Analysts in Tokyo fear that a banking collapse could have a damaging impact at a time of political uncertainty after the prime minister, Yoshiro Mori, announced his intention of resigning.

Concern over Japan's economy and a marked slowdown in the US have fuelled stock market falls across the world, with the Dow Jones industrial index in New York losing more than 3% in Wednesday's trading.

President Bush says he's concerned, but retains great faith in the American economy.

Dow Jones slump

Wall Street's benchmark Dow Jones index dropped below the 10,000 point barrier on Wednesday as the global share slump showed little sign of ending.

The Dow Jones Industrial Average - reflecting the value of 30 of the largest firms in the US - closed at its lowest level in nearly two years and the first time below 10,000 points since October.

At its lowest, the Dow was down 395 points, or 3.8%, and although it rallied in late afternoon trading, losses easily wiped out Tuesday's 82-point advance and compounded Monday's 436 point drop.

To add to the gloom, the Nasdaq market, home to some of America's best known technology and telecom companies, fell back below the 2,000 point mark, close to levels last seen more than two years ago.

-- Anonymous, March 15, 2001