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Stocks Resume Dive in Europe, Tokyo Markets : Wall Street's Record Gain Wednesday Fails to Help

October 23, 1987|From Reuters

LONDON — European stocks went back into a nose dive Thursday, losing much of their gain of the past two days as renewed fears from Monday's panic once again hit prices.

The rebound that helped Wall Street claw back more than half of Monday's record plunge began to lose momentum in Asian trading Thursday. Stock markets in Tokyo and Sydney, Australia, closed just marginally higher despite the impetus of a record 187-point gain on Wall Street on Wednesday. Hong Kong's stock exchange said Thursday that it would remain closed until Monday, despite pleas from small investors that trading resume.

Tokyo's 225-share Nikkei index followed Wednesday's record rise by gaining more than 1,000 points during Thursday's trading before falling to close at 24,404.45, up only 457.05 points, or 1.9%.

Share prices plummeted in early Tokyo trading today, with the Nikkei average falling 771.86 points, or 3.2%, to close the morning session at 23,632.59.

Following Thursday's news from Tokyo, European trading was then hit by a number of shocks.

Kuwait reported an Iranian missile hit an oil installation, raising fears of a wider conflict in the Persian Gulf, where the U.S. Navy has a large presence.

In addition, the Dow Jones index of 30 industrial stocks fell 77.42 points Thursday to 1,950.43 after two days of record point gains.

"It looks like it's getting out of control again," a London dealer said.

London, Frankfurt, Paris, Milan, Brussels, Zurich and Amsterdam all ended the day lower, although some, including London, closed above the day's worst showings.

London's 100-share index nose-dived in early afternoon to a low that was 10%, or 194.7 points, down from Wednesday at 1,749.1, back where it was in the grimmest moments of a panic selloff on Monday and Tuesday.

Then it rallied, tracking a recovery on Wall Street after early falls there, and closed at 1,833.2. But that was still 110.6 points, or 5.7%, down on the day and wiped out nearly all of the 7.9% record climb during the worldwide rebound on Wednesday.

London Stock Exchange Chairman Sir Nicholas Goodison said: "Action on the political level is needed to stabilize confidence. I would particularly like to see action on the U.S. budget deficit."

London trading volume was huge. About 820 million shares changed hands, and the exchange had to proclaim "fast market" conditions on its automated quotation system, meaning that the volume of price quotes was so high that figures on screen might not be up-to-date.

Volume was lighter in Paris, where the exchange indicator gained 3% early in the day and then ended down 2.95%. "I think confused is the word for it. Nobody seems to know what they're doing any more," one dealer said. Wednesday's gains there were virtually wiped out.

London Eurobond traders said they had effectively stopped making markets in Japanese equity warrant bonds--bonds that entitle holders to buy Tokyo stock at a fixed price. The options are worthless in a falling stock market.

"Everyone assumes that when the Tokyo Stock Exchange opens tomorrow (Friday), it will be down sharply," a trader said. It was.

But another said: "There is nothing to panic about. A 450-point rise is pretty impressive. It is just a little profit taking after yesterday's and today's huge rises."

Brokers said they felt that Tokyo was critical in leading world markets back. "Tokyo's market declined the least out of the four major world markets and rebounded the quickest and in the most convincing way," a broker at Nikko Securities said Thursday.

But another Tokyo broker said: "The possibility of another plunge has not disappeared."

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