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12th Anniversary of 87 Crash Unsettles Investors

In a coincidence that could further unsettle financial investors, this week is the 12th anniversary of the stock market crash of 1987. John Howard reports.

There is a financial-market truism - America sneezes and the rest of the world catches pneumonia.

Markets around the world are preparing for a storm of volatility this week after being buffeted on Friday as concerns about interest rates and the valuation of equities scared US investors.

Global markets are opening in the shadow of a 5.92 percent fall last week in the Dow Jones Industrial average - the biggest decline for the Dow since October 1989 - and against a backdrop of continued strength of the yen against the US dollar.

Analysts are warning there would be little in US economic data to be released this week to clarify the mixed picture of US economic performance or settle whether the Federal Reserve will have to raise interest rates at its meeting next month.

Friday's fall in the Dow was prompted partly by the news that US producer prices had risen 1.1 percent in September, a higher month-on-month figure than many expected.

A benign September inflation figure is expected in figures due out tomorrow but another solid rise in imports in the US trade balance figures, due out Wednesday, would only raise market anxiety over the ability of the US to finance a widening current account deficit.

Investors are also starting to doubt the sustainability of US corporate profits, even though many US companies are beating expectations in the third quarter earnings season. The Y2K computer roll-over outcome is also creating a small amount of nervousness.

On Friday Japan's Nikkei 225 index closed more than 2.5 percent down on the week, hit by a combination of the yen's strength and Wall Street's weakness. European stocks dipped sharply after US markets opened lower.

However, the more the market's sell off on Fed fears, the less likely an actual Fed tightening will be.

The Euro Central Bank and the Bank of England are due to meet before the Federal Reserve's next monetary policy on November 16 and some analysts believe the Euro banks are more likely to raise rates than their US counterpart.


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