STUART GRUDGINGS, Tokyo | Wednesday
TRAUMATISED financial markets showed signs of steadying on Thursday, helped by a huge fund injection by world central banks in response to the vicious attack on US power centres.
But deep uncertainty as well as horror at the human cost ensured trade remained very light and stock markets were still floundering for direction without New York’s lead.
The Federal Reserve’s injection of more than $38-billion to reassure panicky markets came in addition to the $80-billion in liquidity pumped into the financial system by the European Central Bank, the Swiss National Bank and the Bank of Japan.
“I think people are going to say ‘stock market crashes are the last thing the U.S. needs, let’s hold the line, let’s show our support for the government, and bugger the terrorists’,” said Andrew Sekely at Intersuisse Ltd.
The government moves helped the dollar to halve its losses from Tuesday, when investor confidence crumbled and panic set in.
By late morning in Tokyo, the dollar was steady at 119,47 yen from 119,49 in late New York and up over a yen from a post-attack low of 118,50 yen.
Tokyo stocks drifted uncertainly, ending the morning up a bit after being hammered six percent lower the previous day on fears the attacks could worsen Japan’s already grim economic condition.
The benchmark Nikkei average was up 0,12% or 11,50% at 9,621.60, after slipping below the 9 500 level for the first time since December 1983.
The Tokyo Stock Exchange opened at 9:30 a.m. (0030 GMT), 30 minutes later than usual, and price limits have been halved for the second straight day to prepare for volatility. It was the first restriction on daily limits since August 24, 1971, when limits were cut by half for four months after the United States unpegged the dollar from the gold price.
“The attacks will chill US consumption which is obviously a big negative for Japan, and investors are very nervous about how U.S. stocks will react,” said Tetsuya Ishijima, chief strategist at Okasan Securities.
Oil and gold markets remained subdued as initial panic buying subsided.
Aside from uncertainty over the impact on the U.S. financial system and Washington’s expected military response, normally ruthless traders cited a reluctance to speculate so soon after the tragedy.
“Obviously, there are major worries about settlement risk, but very few are willing to ditch their morals and speculate at a time like this,” a forex dealer at a Japanese bank said.
The euro was calm at 90.57/62 cents and 108.36/46 yen from 90,62 and 108,43. Tokyo dealers said volumes were down to nearly a quarter of normal turnover.
In Hong Kong, the Hang Seng Index rose 1,12% to 9,599.93, following an nearly nine percent plunge on Wednesday.
But markets that had closed on Wednesday suffered badly, forcing Thailand’s finance minister to call on investors “not to panic” as Bangkok share dived nearly ten percent.
Thailand’s SET index plunged 9,79% to 298,04 just one minute after opening. In Malaysia and Taiwan, whose stock markets also closed on Wednesday, the main indices fell by 3,82% and 5,75% respectively.
Helping to lift spirits, European stocks had moved higher in grim, volatile trade on Wednesday, but were well off pre-attack levels and had no lead from the all-important New York market.
The New York Stock Exchange was closed for a second straight trading day, the first time since the end of World War Two in August, 1945. Officials said full or partial equities trading will resume as early as Friday and no later than Monday.
One worry in Asia is that US mutual funds may redeem holdings in the region after New York reopens as nervous investors liquidate equity holdings.
Despite a calm opening on Thursday, Tokyo forex dealers said there were still worries about settlement problems. Currency volumes in London — the world’s biggest foreign exchange market — fell by at least 50% amid severe logistical problems.
Many operators restrained from trading actively following an advisory from the international financial market association, the Association Cambiste Internationale, or ACI. It asked banks to refrain from unnecessary trading in the wake of the attacks.
Dealers said the market had been reassured by the Fed’s move to boost its temporary reserves, and after Group of Seven world powers said they were ready to provide liquidity to ensure markets operate “in an orderly fashion”.
But the market was marking down expectations of joint currency intervention after Bank of England Governor Sir Edward George said it was “extremely unlikely”.
In the bond market, benchmark 10-year Japanese government bonds came under pressure on worries that financial institutions would need to sell to raise cash ahead of half-year bookclosings.
The fall in stocks was also fuelling talk that the government may have to compile a bigger extra budget this year.
Fears that world oil supplies could be disrupted eased after Saudi Oil Minister Ali al-Naimi said on Wednesday the kingdom will cooperate with fellow Opec producers to cover any oil supply shortage following the attacks on the United States.
The New York Mercantile Exchange’s benchmark energy markets for oil, gasoline, heating oil, natural gas and electricity were all closed on Wednesday.
Asian benchmark crude, was quoted at $25,75-25,77, compared with $26,32-37 on Wednesday. London Brent crude oil futures slumped 3,6% to close at $28 per barrel on Wednesday after jumping $1,61 on Tuesday.
Gold bullion was quoted at $278,75/0.25 at 0415 GMT, slightly down from the London close. The traditional safe haven in times of crisis saw volumes return to normal and was fixed at $279 in London, against $280 on Tuesday at an early close.
But with players still in shock, volumes were subdued and volatility high, and uncertainty looked set to linger as Washington weighs up its response.
(With reporting by Nathan Layne and Mariko Hayashibara) – Reuters
ZA*NOW:
SA markets open, but confusion hits after attacks September 12, 2001