For global markets, the week had a rough start.
It's not globalization's skeptics protesting in the streets of Washington. The US stock markets crashing from the stratosphere rattled bourses around the world.
In Asia and Europe yesterday, hordes of investors learned again that a world of economic interdependence contains steep, profit-sapping pitfalls.
A day of global stock-market declines showed that what starts dropping in New York keeps plummeting in Sydney and Tokyo and Seoul and Frankfurt and Paris and London.
The price correlation of markets is increasingly tight, says Leila Heckman, with Salomon Smith Barney in New York.
Ms. Heckman, managing director of global asset allocation, says that instant communications and closer corporate ties have meant that stock markets move together more often, especially when markets decline rapidly.
European investors, for example, hear what happened in Tokyo markets when they wake up, and follow Wall Street moves later in the day.
That tighter correlation was seen in the stock market crash of 1987, during the Gulf War in 1991, and nearly three years ago in the Asian financial crisis. Both the Federal Reserve in the US and the International Monetary Fund scrambled to keep the Asian regional crisis from going global.
This time the wind is blowing the other way.
After Wall Street's record-breaking week, market-watchers spent the weekend waiting for the shoe to drop in global markets. Yesterday, Tokyo's Nikkei bench mark lost nearly 7 percent. Indices in Singapore and Hong Kong fell more than 8 percent. Trading was halted in Seoul, but the market fell 11 percent.
In London, Paris, and Frankfurt, main indexes closed down but avoided Asia's steep declines. Wall Street prices rose moderately in early trading Monday.
Companies of the so-called New Economy led the way down in Asia and Europe, just as they did in New York last week. Investors around the world seem to agree that they have had too much of a good thing when it comes to high-technology companies and Internet start-ups. But all manner of stocks were affected in Monday's sell-off.
The most profound worry in Asia is that America's boom is about to stall. Only the most isolated economies can protect themselves from an American contraction,economists say.
Japanese officials have been grumbling about a speculative bubble in US markets, and the new volatility will give them reason to raise the volume. "You're going to hear more overt critical voices," says Merrill Lynch chief Japan economist Jesper Koll.
Circumstances on Wall Street triggered the decline in Tokyo, says Susumu Takahashi, chief economist of the corporate-backed Japan Research Institute. "The US stock market was in a 'bursting bubble' situation and last week's sharp drop in stock prices was to adjust to that condition.... If stock prices in the US decline further, those in Tokyo will decrease again, but I don't think the US [markets] will keep falling."
In London, Nomura Securities' Anthony Burton said the expected fall was due to selling "by small retail investors, not the big institutions which appear to be calculating that there isn't a market to sell into."
On Monday, Japan's leaders concentrated on damage control, not blame allocation. They fear that market volatility or a glitch in the US economy could silence Japan's stuttering recovery, which many businesspeople and economists are finally beginning to believe is for real.
"The strength of the Japanese economic recovery is quite clear, so I'm not particularly worried," Finance Minister Kiichi Miyazawa told reporters. Other politicians weren't so sanguine. In suggestions reminiscent of a supposedly bygone era - in which Japan's government shepherded companies and investors - some political leaders said they would consider spending government money to prop up share prices.
Political anxieties may be forcing them to consider such a retrograde step. The ruling Liberal Democratic Party knows it must contest parliamentary elections by mid-October; it cannot risk the political fallout of a damaged economy.
"The corporate recovery here is basically independent of the stock market," adds Mr. Koll, who is known for being bullish on Japan. But he acknowledges that a continued decline in the Nikkei average would mean "red lights" for the recovery.
Rupert Carnegie, of London-based fund manager Hendersons, says "It would be helpful if the US economy slowed, which is one of the reactions people are expecting. If what is happening causes people in the US to shop less aggressively, that will probably be healthy for the world economy."
In Asia, as elsewhere, market-watchers took heart on behalf of Old Economy companies, which may now receive more attention from investors fleeing technology start-ups. "I'm not too depressed," says Scott Foster, who watches Japan's established technology companies for Lehman Brothers in Tokyo. The upside of the recent turmoil, he says, is that investors are coming back to earth.
Still, even well-established companies depend on exports, and one effect of yesterday's instability was to drive up the value of the yen in relation to the dollar.
Percent change in key stock market indexes in Asia yesterday:
New Zealand - 4.7
Philippines - 4.8
Indonesia - 4.9
Thailand - 5.2
Australia - 5.7
Malaysia - 6.0
Tokyo - 6.98
Hong Kong - 8.6
Singapore - 8.69
South Korea - 11.6
*Staff writer David Francis and Alexander MacLeod in London contributed to this report.
(c) Copyright 2000. The Christian Science Publishing Society