Eurobourses Fall As Us Rate Worries Dominate

Major European bourses fell sharply yesterday "" a trend mirrored on Wall Street "" as worries about credit tightening weighed on markets ahead of an important US interest rate meeting today.

On Wall Street, the Dow Jones Industrial Average tumbled more than three quarters of a per cent or about 50 points within minutes of opening as investors worried that an increase in interest rates could take a bite out of the US economy, hurting 1997 earnings.

It's getting sloppy out there. The light volume says you should attach a little less importance it ... but there's no question that people are worried, said First Albany chief investment officer Hugh Johnson.

 

Leading London stocks were down over one per cent, or about 40 points, shortly after Wall Street opened. Declining shares were in an eight-to-one majority but volume was light.

On Friday, the blue chip FTSE 100 index closed down 10 points after hitting an intraday peak of 3,994.1 "" just short of the psychologically-important 4,000 level.

The rate-setting meeting of the US Federal Open Markets Committee on Tuesday was overshadowing both stock and currency markets.

People will just be sitting tight, desperately keen to keep out of trouble, said one trader.

In Frankfurt, German shares ended bourse trade down nearly one per cent, slipping on profit-taking after recent sharp gains and on uncertainity ahead of Tuesday's Fed rate decision.

The 30-share DAX ended bourse trade down 19.06 points at 2,627.04.

And on the Paris bourse shares also fell further from opening losses on profit-taking, with dealers cautious about US rates and because of book-squaring on the last day of the September accounting period.

Dealers said the firming of the franc against the mark was not helping shares.

Peugeot fell 1.7 per cent to FFr572 after it said its profit for the first six months of 1996 shrank by more than half as a brutal price war in France took a heavy toll on the domestic car industry.

On the currency markets, the dollar was steady, with trading volumes low in the absence of Tokyo overnight,which was closed for a holiday.

However, the deutschemark lost ground against European currencies, particularly the French franc, following the weekend European finance ministers' meeting which took place in Dublin.