Markets urged to stay calm after attacks

Markets urged to stay calm after attacks

Agence France-Presse, New York

World financial leaders appealed for calm on Thursday after markets were left badly shaken by a series of deadly bomb blasts that ripped through London, Europe's foremost trading center.

European Central Bank president Jean-Claude Trichet said there was no need for special action by the ECB or the Bank of England, which both left interest rates steady on Thursday, but that they stood ready to intervene if necessary.

"We mustn't allow the situation to get out of hand by acting wrongly or panicking," German Finance Minister Hans Eichel said.

"The global economy is not going to be knocked out of kilter," he insisted, adding that finance ministers were in contact with their respective central banks after Thursday's rush-hour bombings that killed at least 37 people.

European stock markets plunged, sterling slid against major currencies and oil prices plummeted from record peaks reached on Wednesday owing to concerns that the attacks would dent global growth and discourage airline travel.

But by the end of trade in New York, the contract for light sweet crude for delivery in August was down only 55 U.S.cents at US$60.73 a barrel as traders refocused attention on a hurricane bearing down on the Gulf of Mexico.

U.S. Treasury Secretary John Snow said his department was monitoring global markets in the wake of the "horrific" bomb attacks on London underground trains and a double-decker bus.

Snow said during a visit to Omaha, Nebraska, that "these horrific acts stand in stark contrast to the compassionate work" at the Group of Eight summit in Scotland in trying to alleviate global poverty.

In London, the FTSE 100 share index closed 1.38 percent down at 5,158.3 points. The Frankfurt DAX 30 fell 1.85 percent to 4,530.18 points, while in Paris the CAC 40 dropped 1.39 percent at 4,220.62 points.

Shares in the British travel and tourism sectors were among the biggest fallers with British Airways, cruise-ship group Carnival, the Hilton hotel group and Intercontinental Hotels all slumping.

Insurers also took a tumble on worries over the potential liabilities stemming from the London bombs.

Wall Street was more phlegmatic with both the Dow Jones and tech-laden Nasdaq averages regaining positive territory after heading down earlier.

"Unfortunately, western societies have come to expect some type of terror attack somewhere from time to time," broker Ryan Beck and Co. said in a research note.

"As a result, terror risk premiums already exist in all financial markets," it said.

Sterling fell sharply on news of the blasts, remaining under pressure after the Bank of England's decision to keep British interest rates on hold at 4.75 percent for the 11th month in a row.

The pound stood at 1.7437 dollars in late New York trading after falling to as low as $1.7404 in Europe, from 1.7532 late on Wednesday in New York.

The euro inched up to $1.1938 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.

Trichet said he had contacted both Bank of England chief Mervyn King and U.S. Federal Reserve chairman Alan Greenspan following the attacks.

"At this stage, we have no information that would be calling for action," he said. "If it were the case, you can be sure that we would do that in real time."

In the wake of the September 11, 2001 attacks in the United States, the Fed and ECB led major central banks in pumping extra liquidity into the markets and a week later, cut interest rates in a coordinated move to boost confidence.