Boston — ``Black Monday'' and ``Terrible Tuesday'' - Oct. 19 and 20 of last year - were grim around the world. Global financial markets had been rumbling for days. The dollar, the United States trade deficit, and interest rates were more and more unstable.
Before New York opened on that fateful Monday one year ago, London, Hong Kong, and other cities were already recording major losses. Tokyo fell 620 points; London, 300. Gold, refuge of the fearful, soared $15 an ounce.
When the closing bell rang, New York's 508-point loss got most of the attention. But the day didn't end there. Traders kept hedging and betting into the next morning in Tokyo, Hong Kong, Singapore - and later, in Western Europe and London and back in New York.
If anything brought home the idea of interlinked financial markets, it was the ``Black Monday'' collapse. When the bubble burst, it burst all around the world.
``Driving the downward momentum,'' an International Monetary Fund report observed, ``was ultimately a sense of financial panic that quickly became self-reinforcing within the framework of a fully integrated world system of electronic trading.''
And yet after the panic was stopped and markets began to stabilize, the world economy (as economist Paul Samuelson points out in the column on the right) shook off the huge financial-market losses.
```Black Monday' was at best `gray Monday,''' says Grady Means, international economics director of Coopers & Lybrand's Strategic Management Services Group. ``A slip in the financial markets doesn't necessarily relate to the underlying trend in the economy.''
The underlying trend, Mr. Means says, had been getting better and better before the crash. It remains encouraging.
``Japan is as strong as before Oct. 19,'' he observes. ``The UK is going great. France is doing well. Only West Germany and Italy are weak - but they were weak before.''
Means, author of a new report on the worldwide economic and business climate, is most bullish on the US. Oct. 19 had little effect on the US economy.
``Every measure of strategic economic and business strength,'' he says, ``indicates that the US economy and business have entered a period of tremendous renewal, are far sharper on the international competitive stage, and will lead the world's economic and business arena well into the next century.''
Still, with the rise of Japan, Taiwan, and other capital-rich nations, US financial markets will not be free from the influence of overseas investors, says David Hale, senior economist with Kemper Financial Services in Chicago.
``In years to come,'' he notes, ``foreign buying could become a more decisive influence on New York [stock market] valuation levels than it has been during most of America's modern history.''
The linking of global markets also meant a linking of speculative attitudes before ``Black Monday,'' notes Helen Hotchkiss, senior economist with Drexel Burnham Lambert in New York. She thinks the impact of the collapse around the world was relatively modest for two reasons:
Stock ownership outside the US is fairly thin. Wealthier people with stocks were hurt by the market's huge losses. But those with more modest incomes tended to put their money in less risky savings accounts and government bonds.
Oct. 19 was not the result of a major, end-of-cycle constriction of the money supply. Thus it did not presage a recession. Notes Ms. Hotchkiss: ``It was a shock to the system, and it caused a lack of confidence. But it was not based on a lack of liquidity.''
Curiously, the markets that did worst in the crash were ones that also had well-developed futures - innovations blamed for much of the volatility in the US. Hong Kong had a big futures network; Japan did not. Hong Kong is still struggling with major problems the slide uncovered. But most markets have recovered.
Morgan Stanley Capital International Perspectives notes that 15 of the 18 market indexes it follows are still below their pre-``Black Monday'' levels, measured in US dollar terms. Belgium, Denmark, and Japan are above where they were, but almost all markets have staged recoveries since late October of last year. (See table.)
``The big money was made during the bounce - after the crash up through June,'' says Christian Wignall, senior vice-president for international investments of GT Capital Management in San Francisco. ``Since then it's been dull.''
``Black Monday'' was the end of an era, however, observes Mr. Wignall. Until then, money everywhere had been chasing stocks. The world, still recovering from the early '80s recession, had excess capacity. There was little need to invest in factories, equipment, or new business. The global economic system was not in high gear. Extra money went into stocks.
But by 1987 the global economy was running faster and faster. After ``Black Monday,'' with stocks a risky proposition, investments in real things - factories, real estate, businesses - became much more attractive. The investing-in-paper era, Wignall says, may have ended.
How markets fared Change in indexes from Oct. 16, 1987 (just before the slide) to Oct. 10, 1988 Australia -16.03% Austria -13.48 Belgium 13.62 Britain -16.92 Canada -0.54 Denmark 12.24 France -0.57 W. Germany -16.44 Hong Kong -28.87 Italy -18.78 Japan 6.17 Netherlands -11.23 Norway -31.82 Singapore/Malaysia -23.45 Spain -7.85 Sweden -3.16 Switzerland -24.45 Source: Morgan Stanley Capital Intl. Perspective