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Sep 17 - 23, 2001

Thousands dead as planes crash into WTC, Pentagon

In what is said to be the most devastating attack on the United States since the Pearl Harbour bombing during the Second World War, unknown men launched a simultaneous air attack against US political and financial centres on Tuesday, with two hijacked aircraft slamming into the World Trade Center in New York, one crashing into the Pentagon, and a fourth in Pennsylvania.

There were reports of five aeroplanes being hijacked from different airports in the United States. One of them was missing.

Fifty thousand people are employed at WTC and 24,000 at the Pentagon.

New York City officials could not give casualty figures, but some TV networks put the figures in the thousands. One US TV network put the death toll at 10,000.

Almost 2,000 people were admitted to hospitals in New York.

President George W. Bush immediately put the US military on a global high alert and vowed to hunt down and punish those responsible "for these cowardly acts".

The terrorist attacks apparently caught US security authorities by surprise.

The first sign that something went terribly wrong hit New York City shortly before 9am (6pm PST) when an American Airlines commuter plane flew low and slammed into a tower of the World Trade Center. Another plane hit the other twin tower minutes later, triggering a huge fireball that was seen by millions on TV. Both buildings collapsed an hour and half later.

At about the same time as the crashes on the World Trade Center, an aeroplane crashed into the Pentagon building, the headquarters of the US defence establishment. Part of the Pentagon collapsed later.

The White House, the State Department, the Capitol Hill and other federal agencies were evacuated .

Banks act to save markets

Central banks around the world have acted swiftly to keep financial markets working following Tuesday's terror attacks on the United States.

Reacting to fears of a shortage of funds in markets, the European Central Bank swiftly supplied cash to the markets to help restore confidence and stave off the risk of a global recession in the wake of the attacks on New York's World Trade Center and the Pentagon.

The attacks struck the heart of New York's financial district and dealers said the incidents would certainly weaken the U.S. economy, and by extension the global economy, which central banks could counter with rate cuts.

The ECB said it will instantly lend $63 billion (70 billion) to the markets and the Bank of Japan said it supply almost $17 billion.

ECB seeks to calm nerves ECB President Wim Duisenberg told the European Parliament: "The ECB has decided to do a quick tender at a fixed rate of 4.25 per cent in order to calm down the tensions in the market.

"This demonstrates that we are alert and that we are answering very short term panicky reactions in what I believe is an adequate way."

He added it was "too early to judge" what the effects of the attacks would be on world economies, and said he believed an immediate cut in key interest rates would have "inspired panic rather than stability and calmness".

The Bank of England, the Swiss National Bank and the central bank of Turkey vowed to pump money into the markets where needed as Europe's bourses opened for business.

In Zurich the Swiss National Bank (SNB) added funds to the money market to tackle liquidity strains amid demand for francs, a traditional safe haven.

Earlier on Wednesday, the Bank of Japan acted to soothe fears of global economic paralysis and was quickly followed by central banks in Australia, South Korea, Singapore and Thailand.

French growth slows

France's economic growth continued to lose steam in the second quarter as the global economic slowdown took its toll on the euro zone's second-largest economy.

French statistics office INSEE said on Tuesday that growth in gross domestic product eased to just 0.3 per cent compared to the first quarter of the year, in line with forecasts by economists polled by Reuters.

The first quarter figure had previously been revised from 0.5 per cent down to 0.4 per cent.

Nonetheless, growth in household consumption slowed to 0.3 per cent in the second quarter compared to the 1.2 per cent rise registered in the first, the data showed.

Growth in overall investment, the other component considered as crucial to compensate for a drop in demand for French goods, ground to a halt in the second quarter of 2001, at a rate of zero per cent, after a revised 0.6 per cent in the first quarter.

U.S. growth forecasts cut

The U.S. economy will grow at a slower pace than previously thought but a recovery from the yearlong slowdown is likely to come by the end of 2001, a panel of economists said Monday.

The National Association for Business Economics said its panel of economists cut the estimate for 2001 gross domestic product (GDP) growth to 1.6 per cent from 2.0 per cent. But two-thirds of the 31 economists expect the economy to recover by the end of the year.

Dollar climbs after attacks

The dollar edged slightly higher in thin early trading in Tokyo Wednesday after being hammered down the day before in response to coordinated air attacks on World Trade Center in New York and Pentagon near Washington, D.C.

The U.S. dollar opened at 119.67 on Wednesday in Japan against Tuesday's late offshore level of 118.04.

In early Wednesday trading, the euro was quoted at 91.17 cents.

Tokyo traders were uncertain how dollar will perform in Tokyo on Wednesday, after it tumbled to a low of 118.50 in New York. The euro rose as high as 91.35 on Tuesday.

Fed boosts Euro banks

Moving to head off possible financial disruptions, the Federal Reserve announced Thursday an emergency move to provide up to $50 billion to European banks whose U.S. operations have been disrupted by the terrorist attack on Manhattan.

The swap arrangement will allow the European Central Bank to draw dollar deposits from the Federal Reserve Bank of New York, and in exchange the ECB will make equivalent deposits of euros at the New York fed.

Under the arrangement announced by the U.S. central bank, the ECB would be able to draw up to $50 billion, while the Federal Reserve Bank of New York will get an equivalent amount of deposits in euros, the ECB's sponsored currency.

"The ECB will make these dollar deposits available to national central banks of the Eurosystem, which will use them to help meet dollar liquidity needs of European banks, whose U.S. operations have been affected by the recent disturbances in the United States," the Fed said in a statement.

Stocks to trade Monday

U.S. stock markets will reopen Monday, officials said, after an attack by terrorists bent on crippling the nation's financial capital forced the longest trading halt since World War I.

Officials, putting safety and rescue ahead of business, will keep the major exchanges closed Friday.

But Richard Grasso, chairman of the New York Stock Exchange, said after tests this weekend he expects a full-day of trading Monday for the first time since Tuesday's deadly attack on the World Trade Center.

Nikkei holds onto early gains

Tokyo stocks stayed higher by the midday break Friday, while other markets in the region were mostly down.

Australia, New Zealand, South Korea and Taiwan were weaker. Hong Kong moved in and out of the red.

Japan's benchmark Nikkei 225 average rose almost 1 per cent or 91.09 points to 9,704.18, while the broader capital-weighted TOPIX index did even better, putting on 13.79 points or 1.377 per cent to 1,017.30.

In Australia, the S&P/ASX200 was down 30.61 points or almost 1 per cent to 3095.8. New Zealand's Top 40 index was down 17.59 points or about 1 per cent to 1876.86. In Seoul, the Kospi gave up 17.11 points or 3.4 per cent to 482.14.

Gas prices stable

Gas prices nationwide have risen only eight-tenths of a cent since the terrorist attacks in Washington, New York and Pennsylvania Tuesday, according to the American Automobile Association.

The finding should calm fears of nationwide price gouging and isolated reports of individual gas stations hiking prices to $5 per gallon which surfaced immediately after the attacks Tuesday morning. "This barely perceptible rise to $1.541 per gallon indicates motorists and nearly all gasoline stations have reacted calmly and responsibly with regard to fuel consumption and pricing," said AAA Vice President Susan Pikrallidas.

Rate cut bet boosts bonds

Short-term Treasury notes rallied Thursday, pushing yields to an all-time low, as traders bet the Federal Reserve would slash interest rates as U.S. markets crept back to life two days after Tuesday's terrorist attacks on the United States.

Two-year notes rose 13/32 to 101-7/32, pushing their yield to a record low of 2.98 per cent. Five-year notes added 26/32 to 102-28/32, yielding 3.94 per cent. Ten-year notes gained 22/32 to 102-28/32, with yields down to 4.64 per cent. The 30-year Treasury bond yielded 5.38 per cent, down from 5.44 per cent at Monday's close.

Mortgage rates dip again

Long-term mortgage rates dipped to their lowest level for the year this week, as economic data suggested that the U.S. economy was headed for more trouble and as terrorist attacks on U.S. soil halted Wall Street trading.

The 30-year fixed rate mortgage averaged 6.86 per cent, with an average 0.9 point, for the week ending Sept. 14. The 30-year rate has not been this low since the week ending February 19, 1999 when it averaged 6.82 per cent.The 15-year fixed rate mortgage this week averaged 6.39 per cent, with an average 0.8 point.

WTC claims could hit $30bn

Insurance claims from the World Trade Center attack could reach as much as $30 billion, and Lloyd's of London disclosed

Thursday it has considerable exposure to the hijacked airliners and the WTC.

Chubb Corp. Chairman Dean O'Hare said costs from the destruction could be in the $25 billion to $30 billion range. But a Chubb spokesman later admitted it still is too early for an estimate of the damage.

Industry groups have a much smaller estimate of the insurance costs. The National Association of Insurance Commissioners Wednesday pegged the loss at $10 billion.

European bourses end higher

European markets closed largely higher on Thursday after uneasy trading as investors grappled for direction with the U.S. markets closed for a third session.

London's FTSE 100 closed 0.9 per cent higher at 4,924.7 while the CAC 40 blue chip index in Paris ended 0.3 per cent lower at 4,101.96. Frankfurt's Xetra Dax climbed 0.6 per cent to 4,362.41.

The AEX index in Amsterdam rose 1.5 per cent and the SMI in Zurich gained more than 1 per cent, while Milan's MIB30 index edged up 1.3 per cent.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, rose 0.6 per cent, with the aerospace and defence and insurance stocks leading gains.

Jobless claims jump

New jobless claims in the United States increased sharply last week, coming in well above expectations to signal continued economic weakness. New claims for state unemployment benefits rose to 431,000 in the week ended Sept. 8 from a revised 410,000 the prior week, the Labor Department reported. Analysts surveyed by Briefing.com had forecast new claims of 405,000.

ECB leaves rate on hold

The European Central Bank has left interest rates on hold despite concerns the terror attacks on the U.S. could trigger a recession.

ECB President Wim Duisenberg had dampened speculation of a cut on Wednesday, saying it was "far too early to judge what the events... will have for an impact on medium-term developments."

Interest rates are currently at 4.25 per cent. Economists had expected the ECB to hold fire, although they did not discount a move in the wake of the attack on the heart of the U.S. business and political centres on Tuesday.

U.S. will respond: Bush

"Make no mistake, the United States will hunt down and punish those responsible for these cowardly acts," President George Bush said on Tuesday after the attacks in New York and Washington.

President Bush said all the federal government's resources will be put into catching those responsible and helping victims of the attack. He said the government has taken all appropriate security precautions and that U.S. military forces around the world are on high alert status.

"We have taken all appropriate security precautions to protect the American people."

China, Taiwan on the brink of WTO entry

China's Finance Minister Xiang Huaicheng said on Tuesday China was on the brink of clearing the last obstacles to join the World Trade Organization.

China is expected to get the go-ahead on its 15-year quest from WTO member countries this week, probably Thursday.

A WTO working party is meeting in Geneva, Switzerland, to settle the last remaining issues.

Another working party is then expected to tackle political arch-rival Taiwan's entry, with the go-ahead coming immediately afterward, probably Friday.

Xiang hopes China's bid can be wrapped up as soon as possible.