November 13, 2001	Tuesday	Shaba’an 26, 1422

LONDON, Nov 12: Stock markets slumped and the dollar tumbled on Monday as news of a plane crash in New York sparked fears of a new wave of terrorist attacks.

Frankfurt share prices plunged over four per cent, while the London and Paris share markets both tumbled over three per cent.

In New York, the Dow Jones industrial average slid 1.72 per cent to 9,442.96 and the Nasdaq technology index shed 2.01 per cent to 1,791.74 points.

Oil prices dropped further into loss, with Brent North Sea crude for December delivery down 86 cents at 20.52 dollars a barrel.

The euro surged above 0.90 dollars, then stabilized somewhat to 0.8978 dollars. The dollar fell to 120.10 yen from 120.74 in morning trade.

Gold prices spiked, with the London spot price rallying to 282 dollars an ounce from 277 dollars shortly before news of the crash.

“It’s a knee jerk reaction, we are seeing a little bit of US dollar selling,” said Paul Bednarczyk, economist at the 4CAST economic consultancy.

“People are waiting for more explanation of what’s going on.”

The Federal Aviation Administration in Washington said that the plane that crashed near John F. Kennedy International Airport in New York Monday was an Airbus A300 en route from New York to Santo Domingo in the Dominican Republic.

An FAA spokesman said there was “no indication of a terrorist act,” but that “all options are open at this time.”

But news of the crash sent a shiver through aviation stocks.

British Airways’ share price nose-dived 10.6 per cent to 154 pence, Lufthansa shares tumbled 5.6 per cent to 12.76 euros in Frankfurt, while engine maker Rolls-Royce slumped 7.5 percent to 156.25 pence in London.

While US fixed-income markets were closed to mark Veterans Day holiday, European government bond and short-term interest rate futures jumped higher, with images of the collapsing twin towers of New York’s World Trade Center and the burning Pentagon still fresh in the minds of jittery investors.

“The big question for everybody is whether this is terrorism or not,” said Jim O’Sullivan, senior economist at UBS Warburg in Stamford, Conn.

“If it is, then it sets the recovery process back. Because whatever return to normalcy was coming into place is just going to be set back obviously if it is terrorism. Certainly if it is judged to be terrorism then clearly it’s going to be a negative for the economy and the stock market. That’s only going to give us a flight to quality trade for the bond market again,” O’Sullivan said.

US stock markets — which had recouped nearly all their losses that came after the attacks on the World Trade Center and the Pentagon — tumbled immediately after news of the crash broke.

In Europe, the FTSE Eurotop 300 index — off more than 3 percent immediately after the crash — was down 1.8 percent.

Shares in British Airways fell 6.8 per cent, Air France dropped 1 per cent and Deutsche Lufthansa softened 4.4 per cent.

The world’s largest reinsurance group, Munich Re fell 2.9 per cent and insurer Allianz shed 3.8 per cent.

In the currency markets, the dollar fell sharply against major currencies before recovering some of its losses in midmorning trading as investors dumped the US currency and snapped up the safe-haven Swiss franc.

The dollar fell to one-month lows against the yen and tumbled nearly a full cent against the euro.

“The plane crash has raised concerns about terrorism again in a manner that has been clearly detrimental to the dollar, but now reports that it might not be a terrorist attack have let it come back a bit,” said Bob Lynch, currency strategist at BNP Paribas.

“However, I would expect the dollar to remain on the defensive until more clear information comes,” Lynch said.

Against the euro, the dollar fell as low as 90.16 cents before recovering slightly to 89.52 cents. But it remained down just slightly on the session, while the Swiss franc jumped half a cent against the dollar to highs of 1.6415 francs before falling back to 1.6316 francs, up half a percent on the day.

The dollar hit a one-month low against the yen, tumbling as low as 119.73 yen before bouncing back to 120.21.

Gold futures jumped to a 3-1/2 week high at $282.50 for the December contract, and NYMEX crude futures extended already-hefty overnight losses to sink 87 cents to $21.35 a barrel.

With the US Treasury market closed, investors fled to the safety of European government bonds, and their yields tumbled.

“The market is being dragged by this air crash. Two- and five-year debt paper is squeezed. We are not clear whether it is a terrorist attack, but the Schatz and Bobl are unlikely to get as much positive safety flows as they did on September 11,” said a trader in Rome. —AFP/Reuters