Frankfurt market crash - 20th of October 1987

Essay by Witek November 2004

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FRANKFURT, 20th of October. The sharp fall in prices that hit the New York's Wall Street on Monday triggered, on Tuesday, a large selling-wave in all the international stock markets. In many financial markets it also caused a hectic rush, turbulence and on various occasions, panic. The opening times of the stock market had to be extended. During the course of the day, though, towards the closing of the interest rates-market, stabilisation emerged in some markets. In the loans-market there was an exceptionally large market gain and Frankfurt's pensions market boomed. The Dow Jones-Index for 30 American industrial stocks, after falling on Monday by 508 points, subsequently climbed on Tuesday by almost 200 points, and then fell below the previous day's performance level. The price of the dollar gained in Frankfurt from 1.7740 to 1.7980 German Marks. The price of gold, usually used as a crisis-indicator, dropped from $481 to $464.30.

In Frankfurt the stock prices were mostly positioned about 10% lower; some of the national investing institutions used the opportunity to purchase at the reduced level before anyone from abroad would do so. The information about sales was very variable. At the opening of the official stock market many stocks were still traded at notably lower prices; for some securities like BASF and Hoechst there was, however, market profit of more than 5%. The unclear situation increased nervousness and caused a hectic rush. In the course of the market session, which was extended by half an hour, prices experienced large fluctuations. When compared with the closing prices, clear losses dominated, although there were some profits. There was a frequent rumour that the situation had stabilised.

After the mood in the American loans market distinctively improved, the prices of the German state loans increased by 2 percentage points. In official...