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World Markets Make Gains; Tokyo Extends Rebound Early Today

October 22, 1987|TYLER MARSHALL | Times Staff Writer

LONDON — A shocked and nervous London stock market on Wednesday staged a partial recovery from its two-day, 500-point crash, but there were few signs of celebration in Europe's largest equities market.

Prices also advanced on the Tokyo Stock Exchange. The 225-share Nikkei stock average closed Wednesday at 23,947.40, an increase of 2,037.32 points, or 9.3%--the exchange's largest one-day advance. And prices opened higher this morning, buoyed by Wall Street's stunning rebound Wednesday, with the Nikkei index surging 729.96 points, or 3%, to 24,677.36 by the end of the morning session.

Prices recovered in Australia, continued to fall in Taiwan and the Hong Kong market was still closed Wednesday.

In a mood heavy with uncertainty, analysts in London expressed relief at Wednesday's 142.2-point rise in the Financial Times' 100-share index, but apprehension at the realization that London had effectively lost control over its own destiny and had become a captive of Wall Street's gyrations.

"We were quite hopeful a couple of weeks ago that the (British) market had become decoupled from Wall Street, but that's obviously not the case at the moment," said Alan Yarrow, an analyst at Kleinwort, Grieveson Ltd., a London brokerage.

Added Nigel Randell, an international economist at James Capel & Co.: "We're in for a volatile, nervous market while people rebuild their confidence."

Wednesday's recovery, the largest one-day rise ever recorded in the London market, still amounted to little more than one-quarter of the losses sustained during the week's first two trading days.

The Financial Times' 100-share index closed at 1,943.8, down 15.5% from last Friday's close.

Spurred by Tuesday's rally on Wall Street and the overnight surge on the Tokyo exchange, trading in London opened up sharply, then fell back before being spurred again in mid-afternoon by Wall Street's own strong opening.

Buy Orders Swell

As several key institutions reportedly remained on the sidelines, both for the earlier crash and Wednesday's upturn, analysts described the extremely high volume as largely a reflection of the unusual aggressiveness of those in the market.

"Those who are in are in all the way," noted Ian Harwood, an analyst at Warburg Securities. "It's either all-buy or all-sell."

Traders in Tokyo said buy orders swelled against the backdrop of the Wall Street revival, stability in the foreign exchange markets and the prime rate reductions of two major U.S. banks on Tuesday.

Meanwhile, Prime Minister Margaret Thatcher, returning from the Commonwealth heads of government meeting in Vancouver, met for urgent consultations on the financial turmoil with Chancellor Nigel Lawson, while another member of her government attempted to boost public confidence with a parliamentary statement on the economy.

Claiming that the markets "have greatly overreacted," Foreign Office Minister of State Lynda Chalker read a list of the country's bullish economic indicators, including an expected 4% growth rate this year--the fastest of any major industrialized country.

Her comments appeared to be aimed mainly at Britain's private shareholders, most of whom have acquired stock only in recent years and have never seen their equities in decline.

"I think it's fair to say that people are beginning to reassess the risk of holding equity at the moment," Yarrow said.

While some believed that the uncertainty of Wall Street's direction would dampen the London market, few were willing to accept the idea that this week's crash signaled the beginning of a market in prolonged decline.

"We're not long-term bears by any means," Randell said. "The long-term indicators on world economic growth and the coordination between major economies are too good for that."

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