America's New War: What Can we Expect From Markets
CAROL LIN, CNN ANCHOR: Well, let's get a bigger picture on what we can expect today here in the United States and what is happening around the world. John Spencer of Instinet is joining us. Instinet is an after- hours electronic trading system. Good morning, John.</s>JOHN SPENCER, INSTINET: Good morning, Carol.</s>LIN: All right. So what can -- what are you seeing in terms of after-hours trading? What's being sold and what's being bought?</s>SPENCER: Well, before I move on to that, I think it's probably first of all worth mentioning that yesterday was a very big and important day. It was the day that the global financial marketplace welcomed back the New York stock exchanges. And the big news is that everything really worked very, very well. Some 2.83 billion shares changed hands on the New York Stock Exchange. That's a record day. And nothing went wrong. So that's the -- that's the really important news from yesterday. In terms of the prices and the downward pressure that occurred yesterday in New York, that was not so unexpected. Although the Dow Jones fell by some seven percent, in 1987, in the October crash, the Down Jones fell by 22 percent in one day. So it was a significant drop, but no more than that. Indeed, if we were to take a three-week trend-line projection of the downward pressure before last Tuesday's cataclysmic events, we might have expected the prices to be somewhere around where they are today.</s>LIN: John , I'm trying to get you, frankly, to divine the future, though. I mean, you're seeing after-hours trading activity. What sort of activity are you seeing and what kind of an indication will it be in terms of how the U.S. markets do today?</s>SPENCER: Well, before I attempt to divine the future -- and making predictions is always a hard thing to do -- what we say was that most of the sell pressure yesterday occurred in the first hour, where the big drop occurred. All the pent-up sell orders of the last four days, when the markets in the States were closed, happened early- on in the market. Over the rest of the course of the day, there was a gradual downward pressure. When prices went too low, people were in the market buying again.</s>LIN: So what does that tell you?</s>SPENCER: That we'd anticipate that -- what that tells us is that most of the immediate sell pressure has left the market. It tells us that actually last week's events, terrible as they were, are a one-off event. The market is now beginning to really perform in line with the underlying economic and financial trends. So there's nothing unusual or unexpected. And indeed, if we look at the markets in Europe and in Asia, they rose yesterday. After the U.S. markets opened, they saw the extent of the downward pressure, realized there was no panic, so European markets yesterday rose across the board between two and four percent.</s>LIN: So given the uncertainty of any military action by the United States or the Western Alliance, what do you think the market is going to be focusing on today?</s>SPENCER: Well, clearly, risk aversion is high on the agenda. People don't want to be exposed and have very large long or short positions in the marketplace. So people are being cautious and careful, and I think that's only to be expected. The issue is, really, is if there's a sequence of further geo- political military events arising as a consequence of last week's events. And if that happens, then clearly , this will have a very negative effect on the marketplace.</s>LIN: How do you factor in previous military strikes? For example, before the Gulf War started, the U.S. markets took a plunge. And then after the strikes -- and clearly, they were successful at that point -- the markets shot up -- double-digits -- almost 20 percent.</s>SPENCER: Well, I think they shot up at that point in time because people were aware that there was a very strong likelihood of an early success and they realized that the effect on the oil price would not be excessive. It's important to note in the current situation, there doesn't seem any likelihood that there's going to be a big pressure to increase oil prices. So it's a little bit of a different situation today. The key difference today, of course, being that there is anyway strong underlying downward economic pressure on the markets which occurred before last week's event and have been going on for some months now.</s>LIN: All right. So any predictions? One last time, I'll try to tempt you to look into the future in your crystal ball, John.</s>SPENCER: Well, as Mark Twain said, I never make predictions, and especially about the future. I'm afraid that's my philosophy, too.</s>LIN: All right. Thank you very much. John Spencer with Instinet. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com