'Uncharted Territory' For Markets

By CBSNews.com staff CBSNews.com staff

September 11, 2001 / 1:59 PM EDT / CBS

European stock markets showed surprising resiliency Wednesday, while Asian markets bore the brunt of the crisis. Stocks there fell across the board: Tokyo down 6.6 percent, Hong Kong nearly 9 percent, Seoul 12 percent.

Paul O'Connor, a proprietary trader at CSFB in London, told CBS MarketWatch there was a sense the sell-off had been overdone. "Who got involved yesterday? It was the fast money. This morning there's a greater urgency to cover shorts rather than to sell. If the world's ending we've already priced a lot in," he said.

"Looking further forward we now have a greater chance of prompter coordinated policy response by the central banks. With the FTSE 100 having reached Oct 98 lows and bouncing, I struggle to think it's worse than Oct 1998," O'Connor said.

Bracing For The Claims

European insurers are bracing themselves for a flood of claims after the devastating attacks on New York and Washington. Insured losses could reach as much as $15 billion, analysts said.

Shares in the likes of Allianz, Munich Re, Swiss Re and Royal Sun & Alliance were some of the hardest hit after the tragedy on concern that covering policies will savage profit.

Swiss Re, the world's second-largest reinsurer, said claims could match the 1.2 billion Swiss francs ($724 million U.S.) it paid for storms that shook Europe in 1999. Munich Re, the world's No.1 reinsurer, sees "considerable" losses. Reinsurers assume risk for insurers.

"The damage claims from this will likely be higher than any previous disaster," Jean-Christian Huard, an analyst at SG Securities in Paris, told FT MarketWatch. Hurricane Andrew cost more than $15 billion in insured losses.

—CBS MarketWatch

The Federal Reserve Tuesday said it was prepared to inject liquidity into the monetary system.

The dollar fell to 0.9165 from 0.8975 against the euro in the aftermath of the attack but on Wednesday recovered some ground to 0.9120. Sterling rose to a 6-month high of 1.4780 against the dollar on Wednesday and recently traded at 1.4740.

Meanwhile, crude oil prices retreated from Tuesday's high of $31 a barrel, trading at $28.72. Oil shares also gave up gains. Gold, a traditional safe haven, was trading higher in Hong Kong.

European airline and insurance stocks rebounded from heavy losses on Tuesday, largely trading in positive territory.

Wit New York markets closed Wednesday — the first time since the assassination of President John F. Kennedy in 1963 that the New York Stock Exchange has been closed for two straight days — global markets will be trading in the dark in terms of genuine U.S. investor reaction to the attacks on the most potent symbols of U.S. economic and political power.

Globally, investors fear a break down in U.S. confidence will erase any hopes of a stock market recovery and potentially plunge the world economy into a slump.

Markets will also be jolted by the damage to some of the greatest institutions in world finance. Morgan Stanley Dean Witter, Lehman Brothers and Salomon Brothers all had major offices in the World Trade Center.

The markets appeared determined to tough out the crisis after the initial sell-off, easing speculation it could trigger a loss of economic confidence.

"This is uncharted territory, but the immediate reaction overseas is even greater than domestically as people's tolerance for risk deteriorates," said John Hock, chief investment officer at Altrinsic Global Advisors, which manages about $500 million in international stocks.

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