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| London terrorist attacks rattle global financial markets (Regions) |
| | Poster: AFP | Posting Date: 2005-07-07 | |
Global financial markets were badly shaken on Thursday after terrorists carried out deadly explosions in London, closing much of the capital's transport system. In Frankfurt, European Central Bank (ECB) president Jean-Claude Trichet, reassured that financial markets in Europe were functioning. He declared that there was no need for special action by the ECB or the Bank of England but that they stood ready to intervene if necessary. World stock markets plunged while sterling slid as London's transport network was hit by six fatal blasts that also sent oil prices plummeting from the day's record peaks. Volatile oil prices meanwhile pressured the US dollar. "The rapidly deteriorating news flow on the situation in London is creating the expected and justifiable response in markets," Calyon analyst Daragh Maher said Thursday. London's FTSE 100 index of leading shares plunged 1.93 percent to 5,128.50 points after falling more than 3.0 percent following initial news of the explosions. The Frankfurt DAX 30 dived 2.27 percent to 4,510.54 points and in Paris the CAC 40 dropped 2.39 percent to 4,177.47. The DJ Euro Stoxx 50 index of leading eurozone shares tumbled 2.54 percent to 3,142.25 points. European bond yields fell reflecting a rise of prices on the bond market which took on a role as a haven for funds averse to risk. Police reported that at least two people had been killed and scores more seriously injured in the blasts which Prime Minister Tony Blair said were the result of terrorist attacks on central London's transport system. A previously unknown Al-Qaeda-linked group -- the Organisation of Al-Qaeda Jihad in Europe -- claimed responsibility for the attacks in a statement posted on the Internet which could not be authenticated. Sterling fell sharply on news of the blasts, remaining under pressure after a decision from the Bank of England to keep British interest rates on hold at 4.75 percent for the 11th month in a row. The pound stood at 1.7449 dollars at about 1245 GMT after falling to as low as 1.7404 dollars in early European trading, from 1.7532 late on Wednesday in New York. The euro climbed to 1.1972 dollars in early afternoon European trading from 1.1930 late on Wednesday. The European Central Bank held its ground on Thursday keeping its key rate steady at 2.0 percent for the 25th month running despite fierce political pressure for a cut to bolster the faltering eurozone economy. The explosions came a day after the city won its bid to host the 2012 Olympic Games and as leaders from the Group of Eight rich nations met in Scotland for a key summit. Blair left the summit early for London, leaving his peers to negotiate over poverty and climate change. European long-term interest rates fell sharply in early afternoon trading. By early afternoon the yield on the benchmark 10-year German Bund bond had fallen to 3.149 percent from 3.218 percent late on Wednesday. The yield on the French 10-year OAT bond fell to 3.152 percent from 3.219 percent, having reached 3.10 percent in late morning. When bond prices rise, yields fall. The dollar meanwhile fell to 111.66 yen from 112.15 late Wednesday. The US unit suffered as oil prices hit new record high points in morning trade. However, following news of the London attacks, world oil prices tumbled by more than four dollars. Oil futures had earlier surged past 62 dollars per barrel in New York on supply concerns. "Crude oil prices are trading in exceptionally volatile fashion as the market absorbs reports of explosions in many parts of London," Barclays Capital analyst Kevin Norrish said. New York's main contract, light sweet crude for delivery in August, dived 4.08 dollars to as low as 57.20 dollars per barrel in electronic deals on Thursday. Earlier the contract had hit a record 62.10 dollars -- the highest level since it was first traded in 1983 -- as tropical storms threatened to bear down on US oil production facilities in the Gulf of Mexico. New York's contract stood at 60.00 dollars at around 1230 GMT, down 1.28 dollars from Wednesday's close.
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