The sell-off commenced in late trading on Wall Street on Thursday 15th October 1987 and was swiftly taken up by Asian markets on Friday. London would have suffered too, had it not been for the fact that the Stock Exchange never opened on Friday, thanks to the disruption caused by the hurricane that swept through South East England.
We were all caught on the hop back then. For a start, weather man Michael Fish famously proclaimed that these strong winds forecasted had been much exaggerated, giving him a place in meteorological history. More important, the country – at least, that part of it we fondly refer to as the Home Counties – ground to a halt. Electricity was cut off to millions of homes, trains ceased to run, roads were all but impassable, with literally hundreds of vehicles stranded on highways blocked by fallen trees, of which there was a positive magnitude.
The storm had this calamitous side effect. The London Stock Exchange had failed to open that day as insufficient people made it into work to allow a proper market to operate. I can attest to that. The dealing floor at the firm where I then worked, which had several hundred desks and a myriad of computer screens, was all but deserted. Our morning meeting, broadcast over the office tannoy, failed to take place, though one wag grabbed the microphone and quoted from the St Crispin’s speech in William Shakespeare’s Henry V – “We happy few, we band of brothers”.
A lost day in London may not have had such a consequence, were it not for the fact of the major fall on Wall Street the previous evening. Far Eastern markets followed the US down in overnight trading, but the UK was unable to react. When the fall continued into Friday on the Street and Asian markets opened on Monday in disarray, the scene was set for a setback of mammoth proportions once London commenced trading.
Black Monday, as it became known, saw shares lose a quarter of their value in early trading. How different markets feel today, with US equities starting this week at record highs. Even London is faring reasonably well, despite all the uncertainty engendered by the seemingly deadlocked Brexit negotiations. The pound is a little perkier, but then recent inflation figures brought the prospect of an interest rate rise that little bit closer, which should help sterling.
It is not just inflation that will be influencing markets. There are plenty of major companies reporting, while economic news is also in evidence. And there is the Chinese National Party Congress in Beijing, not that this tends to have much influence on the stock market there. However, plenty of speeches from notable dignitaries, including Federal Reserve Bank Governor, Janet Yellen, might impinge on sentiment.
With storm force winds also hitting the UK recently, it is tempting to look back at the events of 30 years ago to see if any other parallels can be drawn. Then the derivatives market contributed greatly to the speed of the collapse. Today circuit breakers are in place, though it would be wrong to assume events could not happen just as swiftly today. We have to hope that the greater confidence being shown in global economic progress is not misplaced and that our exit from the European Union will be less painful than feared.
