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Wednesday, September 19, 2001

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US markets: Boosted by active trading

S. Sethuraman

AMERICA Inc responded with a resounding vote of confidence in the world's giant economy when Wall Street went back to business. There was brisk trading in the New York Stock Exchange and Nasdaq, leaving behind a week of terror, horror, shock and anger, w hich steeled the nation to fight a long war to safeguard its liberty and way of life.

Monday marked one of the most important days in US economic history as the stock market opened after a week's closure, unprecedented in the country, amid expectations of an early return to normalcy and business as usual for the land of enterprise.

Not far from the destroyed World Trade Centre, the narrow Wall Street representing the pulse of the nation's economy, witnessed hectic activity -- which itself was seen as a vote of confidence, no matter the early tumbling of Dow industrials by as much a s 600 points in the first hour.

A dramatic half-percentage point cut by the Fed an hour before the market opened signalled the Government's determination to do everything to buoy up the ailing economy. The Fed announced it was ready to do more to strengthen the financial markets by fur ther cuts. Monday's cut brought the short-term rate to 3 per cent, the eighth since January. But more was expected by way of tax cuts (a reduction in capital gains tax, for instance), new spending and a bailout of airlines on the brink of bankruptcy.

The NYSE and Nasdaq opened with a two-minute silence and a group of rescuers in the Manhattan tragedy rang the opening bell with the Governor of New York, the Mayor and leading corporate and securities CEOs in attendance. Earlier, some leading investors announced they would withhold sale, also understandable during a market depression. PepsiCo said it would spend two billion dollars on stock buyback.

Despite the steep drops in the early hours of trading, the general mood was upbeat, and the Treasury said the US economy's fundamentals are ``strongly and soundly in place''. The market opening was preceded by appeals to patriotism, and the President, Mr George W. Bush's call to Americans to ``get back to work'', even as the patrolling of the American coastline with fighter jets, aircraft carriers, and destroyers continued. America, in the words of its President and Vice-President, is engaged in a crusa de against international terrorism.

The New York Stock Exchange said today's resumption of trading would demonstrate the ``collective determination'' of the nation to go forward ``stronger in spirit and purpose. History has proven the ability of our financial system to survive the darkest challenges time and again,'' it said.

The CEOs of top financial firms said that while there might be some short-term uncertainty in the markets, as on such past occasions as Desert Storm and Pearl Harbour, they would regain their strength within months. Banks, brokerages, investment firms an d government offices all across the country are open for business. ``Our financial infrastructure remains intact'', they said.

On a normal day, trading on the NYSE, Nasdaq and the American Stock Exchange is estimated at $l00 billion. Glitches in today's trading could centre on aviation and insurance companies. Airlines say they are losing $400 million a day with the restricted f lights and tight security regulations, which have slowed down traffic. US Administration officials were in discussions with airline executives on a possible bailout by the Federal Government. The Vice-President, Mr Dick Cheney, said there should be no da mage to the civil aviation industry.

Both the Congress and Administration have begun to see eye to eye on more spending even if the deficit would mean breaking into the sacrosanct social security surplus. The economy is bound to get a big boost on top of the $40 billion voted by the Congres s on relief, defence and rebuilding in New York.

Policy-makers in the US and Europe stand ready to cut interest rates and intervene to defend the dollar and ward off a recession. Last week, the Fed pumped billions of dollars into the market by way of lending to banks and sale to European central banks.

Asian markets, which closed before the opening of the NYSE, sank as traders anxiously awaited Wall Street's response to the terror attacks in New York and Washington. The fall was the worst in l8 years in Tokyo by 504 points while declines were recorded in Hong Kong, Singapore, and Seoul.

(The author, a former Chief Editor of PTI, is a New Delhi-based freelance journalist.)

Related links:
US markets: Bracing for bear attack?

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