European markets sit, watch and wait

UK and European markets are predicted to avoid the worst of the turmoil suffered by their US counterparts, although forthcoming flotations will still be delayed.

The FTSE 100 index gained 90.6 points on 3 November in what appeared to be a further recovery. Some investors see European shares as more independent from the Far Eastern markets than those of the US. But planned flotations may be delayed until the market settles. The largest of these companies is Energis - the telecoms section of the National Grid - worth between #800 million and #1 billion.

The market was using the new electronic trading system for the first time when the problems began. On 28 October, the market fell 10 per cent in the first half-hour in the wake of the Dow Jones collapse. But as the day wore on, the FTSE index began to recover and closed at 4,755.4 - down 85.3 points. Since then it has steadily climbed out of the danger zone.

Some analysts in London claimed the fall was an example of the UK and Europe being dragged down by international events, which have limited real impact on the Continent's economy. One analyst at HSBC James Capel claimed: 'There is no particular logic. We are in a period of causeless volatility. It is wisest to sit, watch and wait.'

But some City analysts remain convinced that the FTSE index, in common with other world markets, is fundamentally over valued. Figures of 4,200 for the FTSE 100 index and 6,000 for the Dow Jones have been suggested as more realistic values for the markets.

Due to the high level of personal investment in shares, fears that a small share fall may have a larger economic impact have been raised.