Originally created 08/29/98

Dow slips, Europe falters



NEW YORK -- The Dow industrials extended its losses Friday after Wall Street faltered in a bid to bounce back from Thursday's 357-point plunge and markets skidded in Asia and Europe.

The Dow, at one point up as much as 78.53, gave up its gains and was down 96.96 at 8,069.96 by early afternoon. At its low point of the morning, the Dow was down 154.47 and threatening to fall below 8,000 for the first time since Jan. 30. Trading was heavy

European stocks, which had been rebounding after opening sharply lower, faltered late in the session. In Asia, some key indexes plummeted to levels last seen more than 10 years ago.

Investors remained nervous about Russia's growing economic and political turmoil and about whether the economic crisis that began more than a year ago in Asia will spread to Latin America.

Thursday's weakness on Wall Street, including a 4.2 percent plunge in the Dow Jones industrial average, added to the negative sentiment.

Its drop Thursday of 357.36 points was the third-biggest point loss ever, trailing only the 554.26-point plunge of Oct. 27, 1997 and the 508-point collapse on Oct. 19, 1987. The percentage drop, while the biggest since last October's swoon, was not close to the record 22.6 percent of the "Black Monday" crash of 1987.

With the drop today, the Dow now is down 1,268 points from its July 17 record high of 9,337.97, a drop of 13.6 percent. The average of 30 big-name stocks, which had been up 18.1 percent for the year at its peak, now is just 2 percent above where it ended 1997.

Thursday's slide marked the first time since last October's selloff, which was also induced by foreign economic troubles, that the Dow has finished a day more than 10 percent below its previous high, a loss commonly referred to as a "market correction." A sustained drop of 20 percent marks a bear market.

The Dow's renewed retreat cut short a midafternoon attempt at a recovery on big European markets. The damage was not nearly as bad as it had been early in the morning, however, when key European indexes were off by around 5 percent.

London's Financial Times-Stock Exchange 100-share index finished with a loss of 2.2 percent. In Frankfurt, Germany, the electronic Xetra DAX index was off by about 1.7 percent by the end of trading, although officials said it might take several hours to compute an exact final value after a hectic session. In Paris, the CAC 40 index lost 1 percent.

"There is a little bit of panic, but it is not Armageddon," said Ian Amstad, an economist at Bankers Trust in London.

In Moscow, Russia's largest stock exchange closed up 5.6 percent, which represented a gain of less than 4 points at its depressed levels. Trading was light.

Big Asian markets never saw any chance of recovery.

Tokyo blue chips dove to a 12-year low, Hong Kong's key index fell 1.2 percent despite heavy buying by the government.

The panicky selling was set off by Russia's economic troubles. The Russian government struggled today to find a way out of its mess, while opposition leaders were clamoring for the removal of President Boris Yeltsin.

"An awful lot of uncertainties are still out there," said George Hodgson, a European stock strategist at ABN AMRO Hoare Govett in London.

But Hodgson said investors may have been overlooking some positive factors: Global economic troubles could make lower interest rates more likely, and some share prices may have plunged to levels where they had become a bargain.

"It doesn't look particularly good, but I don't think we are too far away from the bottom in most European share markets," said Gareth Evans, European equities strategist at Nikko Europe.

The Russian turmoil has added to a year's worth of worries over Asia's financial crisis. As many countries, including Japan, have edged toward or fallen into recession, profits at a wide range of European and U.S. companies have suffered.

Japanese Finance Minister Kiichi Miyazawa used his regularly scheduled news conference today to urge investors to remain calm. "The most important and basic thing is to not panic," he said.

But as trading began today, Tokyo stocks plunged again, and by the end of the day they had fallen to a 12-year low. Even the dollar -- normally sought as a safety net in times of crisis -- tumbled against the Japanese yen.

Japan's Nikkei stock index closed at 13,915.63 points, down 498.16 points, or 3.46 percent, from Thursday. It was the Nikkei's lowest level since March 1986.

In Hong Kong, the Hang Seng Index closed down 93.23 points, or 1.2 percent lower, at 7,829.74.

Trading volume reached an all-time record high of 79 billion Hong Kong dollars ($10.13 billion U.S.), and traders estimated that government buying accounted for more than 80 percent of the trading volume.

As if that wasn't enough, the government announced in the afternoon that Hong Kong has fallen into recession, with its once-booming economy shrinking by 5 percent in the second quarter. Hong Kong officials said their economy is expected to shrink by 4 percent this fiscal year.

"People are very scared of financial markets right now," said Nicholas Brooks of Santander Investment Securities in Singapore.