Investors across the world snapped up safe assets like gold and US Treasuries on Tuesday after two planes careened into New York's World Trade Center, sending it crashing to the ground and pummeling confidence in global stocks and the dollar.
Two hijacked passenger airplanes ripped into the 110-story twin towers of the World Trade Center in lower Manhattan at the start of the New York trading day, triggering huge explosions that hit at the heart of global finance.
Panicked investors, seeking a safe haven for their cash amid fears the United States could slide into recession, drove up US Treasuries, gold, oil and industrial metals prices. Europe's benchmark stock indexes fell to December 1998 lows, with insurers and airlines leading the drop.
US stocks, which did not open for trading on Tuesday, were expected to tumble sharply when trading reopens. The New York Stock Exchange, the American Stock Exchange and Nasdaq said they will remain closed through Wednesday. They said they will decide on Wednesday, with input from the Securities and Exchange Commission, on when to reopen. Most markets in Europe and Asia were set to open as usual.
Stanley Nabi, managing director at Credit Suisse Asset Management in New York, which oversees US$110 billion, said "it will be awful" when trading resumes.
"There are two reasons. The first is psychological. Obviously, this is a blow. The second is fundamental. I think this will make the slowdown accelerate into a recession."
Treasury prices were frozen in morning New York trade after the Bond Market Association recommended an early close of the market. Two-year note yields were pinned at 3.31 percent, a historic low, but traders said quotes were not reliable given the mayhem at New York bond dealers.
The bond association said it had recommended trading be closed on Wednesday. A spokesman said the industry trade group was taking the situation "day by day" and would review on Wednesday the timing of a reopening.
Cantor Fitzgerald and Garban-Intercapital, two of the world's largest fixed-income interdealer brokers, were located in the World Trade Center.
The Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME), both closed Tuesday, canceled electronic trading for Tuesday evening and said open outcry pit trading would be closed on Wednesday.
The New York Board of Trade's Chairman, Charles Falk, said his exchange, which was housed at Four World Trade Center, suffered "significant damage" and he was not sure if it could be restored. NYBOT has a backup facility on Long Island.
Loss of life was expected to be catastrophic from the collapse of the once-mighty twin towers, where roughly 40,000 people, most of them linked to financial markets, worked.
Traders said they feared US benchmark stock indexes, already near their lowest levels of the year, could fall as much as 5 percent when trading reopened.
Stocks in Europe screeched more than 5 percent lower following the tragedy, dubbed the worst attack on American soil since Pearl Harbor. London's FTSE 100 index shed 5.7 percent in its biggest one-day fall since the crash of October 1987, wiping US$98 billion off the value of shares.
William McDonough, president of the Federal Reserve Bank of New York which oversees US monetary policy and plays a key role in ensuring stability in global financial markets, said the US central bank was standing by to provide liquidity.
"Certainly part of our procedure is to provide that liquidity which is needed," McDonough told Reuters by phone from Basel, Switzerland, after attending meetings at the Bank for International Settlements.
US Securities and Exchange Commission Chairman Harvey Pitt said in a statement that trading in stock markets will resume "as soon as it is practicable to do so."
The dollar fell 2 percent against the euro, gave up 3 yen and hit seven-month lows against the pound and the Swiss franc as investors fretted that the economic dislocation and loss of consumer and investor appetite following the tragedy could tip the world's largest economy into recession.
"Once a second plane went into the building panic set in and the euro just took off," said Hugh Walsh, trader at Fortis USA. in midtown New York.
In thin, nervous dealings in Asia, the greenback was pinned to session lows near 91.70 cents per euro, down more than 1.90 percent from the previous US close. The dollar came close to three-month lows around 118.55 yen, but steadied near 119 yen + off a full 3 yen from four-week peaks hit overnight against the Japanese currency.
Euribor short-term interest rate futures soared, implying heightened expectations of lower euro zone rates. The December contract was 0.19 higher at 96.29, its highest since May 1999.
All of Europe's sector indices except energy fell. Insurers were the hardest hit, the sector dropping 11 percent. Swiss Re plummeted 15.7 percent, Axa tumbled 13.3 percent and Royal & Sun Alliance, fell 14.44 percent.
"This is not a markdown, people are actually selling the insurers and it's particularly heavy for the reinsures who take on a lot of the risks for disaster insurance," said one London dealer.
Energy stocks, meanwhile, rose 3.8 percent. BP tacked on 5.2 percent, Shell climbed 3.5 percent and TotalFinaElf edged up 2.9 percent.
Gold prices shot up US$16 an ounce after the attacks, with the afternoon fixing hitting US$287.00 from US$271.40 in the morning and compared with US$272 before the first strike.
IPE Brent crude oil futures surged US$3.60 a barrel to US$31.05, rising above the US$30 mark for the first time since December 2000.
The New York Mercantile Exchange was also closed.
Several top financial services firms had offices in the destroyed World Trade Center, including Morgan Stanley, Switzerland's Credit Suisse Group and Germany's Commerzbank and Deutsche Bank.
(China Daily 09/12/2001)