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America Under Attack: How Are The World Markets Reacting

Aired September 13, 2001 - 04:31   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JONATHAN MANN, CNN ANCHOR: As well as the appalling human cost, there are many more implications, including the impact on the global economy.

Richard Quest joins us now from London with an update on business -- Richard.

RICHARD QUEST, CNN FINANCIAL NEWS CORRESPONDENT: Many thanks indeed, Jonathan.

Yes, the European Central Bank is meeting in Frankfurt around now to discuss how best to limit the economic impact of the attack that was seen in New York. Many people believe that the ECB will make some sort of gesture and perhaps reduce European interest rates. The idea, once again, to try and rebuild confidence, to provide liquidity not only to the markets but also to consumers who may, of course, have been frightened off by what they saw. It seems to be a split view on whether the ECB will actually cut rates. They did so last month, and the last word from the ECB president was that that probably wasn't necessary. We'll have that decision for you in around three hour's time.

To the markets that have been trading and the Asian trading day, also on currency rates, the Japanese yen trading at 119 to the U.S. dollar, the euro 90 U.S. cents, the pound at 1.4652. What we've seen there is some dollar strength coming back into the market.

In Asia when trading was finished for the session, Japan's Nikkei average actually was up a touch at the close of the day. In Hong Kong, the Hang Seng was also up. In that case, up by -- up more than 1 percent, although Hong Kong had suffered quite sharply lower in the previous day, and Singapore was down 1 percent.

On the European markets, because business is well and truly underway, the London FTSE up around half a percent, the DAX three- quarters of a percent in Frankfurt waiting for the ECB decision while the CAC in Paris is basically flat.

That's the way financial world outside the United States is looking at the moment.

Maggie Lake now joins us to bring us up to date with what's happening in New York -- Maggie. MAGGIE LAKE, CNN FINANCIAL NEWS CORRESPONDENT: Richard, we're getting ever closer to morning here and as the bond market is reopening, we wait for stocks perhaps Friday, Monday at the latest, to open.

There are a few major questions facing the markets. The first is will this event push the U.S. economy into recession? We have been limping along. Perhaps this is the straw, some people saying, that breaks the camel's back and pushes us into negative territory. Another big question: Will it crack consumer confidence -- cause people to spend -- pull back on spending and start selling stocks, especially near term? And finally, what can the Federal Reserve do? They are providing liquidity. Will they also cut interest rates immediately as some have suggested and recommended that they do?

Now these are enormous questions, and just want to offer a couple of thoughts on some sentiment coming out from analysts and market watchers today. First of all, in terms of the threat of recession, obviously the business disruption is going to be massive, and no one is pretending it is not going to hurt profits of many companies. But analysts are saying once we get back -- that Diane Swamp One (ph) speaking today saying, although it's a disaster and great tragedy, ironically after the initial disruption, the economy often sees a spurt in economic activity. We are a country that rebuilds and we will. We've already seen the government talking about a package of maybe up to $20 billion spending on defense is expected, security. So there will be some stimulus there.

Also in terms of the consumer, we may see some initial selling, some initial panic or jitters, but a lot of people are offering the suggestion that perhaps people will rally around and actually buy stocks in a show of support for the country. People's sort of spirits galvanized. We're hearing a lot of that sentiment come out from people on the Street, a lot of patriotic feeling. It is a possibility.

It's a very emotional time. It's not clear that that will happen, but we certainly are hearing a lot about that possibility and not just from individual investors, even from the institutional side. There was a bond trader from Pemco talking today. He was asked if they will be selling into the market tomorrow, and his response was that we will trade but we are not going to aggressively try and exploit this situation. We are bond traders, but we are first and foremost citizens.

So there are an awful lot of questions. It is not clear by any means what the outcome is. People should not assume it will all be negative, and a lot of officials and advisors are cautioning people to be patient and calm as we work through some of these questions.

Jonathan, back to you.

MANN: Maggie Lake, thanks very much.

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