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Wall Street History
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07/22/1999
The Russian Financial Crisis, 1998
Following is a timeline of the crisis which struck just about one
year ago. It feels more like 5.
[All dates are 1998]
July 1st - Russia''s lower house of parliament, the Duma,
postpones action on spending and tax reforms needed to close the
budget deficit and qualify for IMF loans. Dow Jones finishes the
day at 9048.
July 6th - Moscow''s markets get pummeled as the government
fails to raise cash by selling government shares of a state-owned
oil company. Moscow hints that an IMF loan agreement is near.
Dow closes at 9091.
July 10th - President Clinton calls on the IMF to quickly conclude
negotiations over emergency loans for Russia, sparking a rally in
Moscow''s markets. Dow hits 9105.
July 13th - IMF announces a package of $23 billion of emergency
loans for Russia. Russian stocks and bonds soar. Dow: 9096.
July 20th - The IMF gives final approval to a $22.6 billion loan
package to Russia. But Duma fails to enact some austerity
measures mandated in the loan agreement, thus the first two
planned installments are reduced. Dow: 9295.
August 4th - Wall Street reacts, finally, to deepening crisis; the
Dow plunges 300 points in its 3rd biggest point loss. [The
markets also reacted to a rumored devaluation in China as well as
worries in the Hong Kong market. Dow: 8487. [The Dow had
peaked at 9337 on 7/17].
August 11th - The Russian market collapses. Trading on the stock
market is temporarily suspended. World markets are rocked by
fears of a financial meltdown in Asia and Russia. Dow: 8462; had
hit 8263 earlier in the day.
August 13th - Russia''s markets collapse on fears that Moscow will
run out of money and default. Dow: 8459.
August 17th - Russia announces a devaluation of the ruble and a
90-day moratorium on foreign debt repayment, triggering panic
in Moscow as Russians line up to buy dollars. Western leaders
denounce the Russian default. Latin American stock and bond
markets plunge on fears of default and devaluation in South
America. Dow: 8574; 8350 earlier in the day.
August 19th - Russia fails to pay its debt on GKO or treasury bills,
officially falling into default. Dow: 8693.
August 21st - Russia''s economic crisis shakes world markets,
bulldozing stocks and bonds in Latin America and reverberating
through the US and Europe. Russia''s Duma calls for Yeltsin''s
resignation. Investors pile into US Treasury bonds as a safe
haven from the storm, causing yields to drop to record lows.
Dow: 8533; 8307 earlier in the day. **Between 8/4 and 8/21
there were 3 days when the Dow had dropped 300 points or
more, intraday. That''s volatility.
August 24th - Yeltsin dismisses Prime Minister Kirienko and
names Viktor Chernomyrdin to replace him. Dow: 8566.
August 31st - After weeks of decline, finally Wall Street is
overwhelmed by the turmoil in Russia and world markets. Dow
plunges 512 points, the second worst point loss in history,
finishing the day at 7539. [The percentage loss in the Dow from
7/17 to 8/31 is 19.2%]
September 1st - Dow rallies back, as has become customary after
big declines, to finish at 7827, after hitting 7400 in the morning.
September 4th - Fed Chairman Greenspan says that the US is
ready to cut interest rates to keep crisis from snuffing out US
growth. "It is just not credible that the US can remain an oasis of
prosperity," he says. Dow: 7640.
September 7th/8th - Russia''s Duma rejects Chernomyrdin''s
nomination, deepening the country''s political and economic
turmoil. Dow surges 380 points (9/8) to close at 8020 as
Greenspan suggests he is considering an interest rate cut.
September 10th - Here we go again. Dow loses 249 (390,
intraday) to close at 7615 as Brazilian stocks fall 16%, adding to
drops that have erased half the Brazil market''s value. Yeltsin
nominates Primakov as prime minister.
September 17th - Tokyo''s Nikkei index hits a 12-year low amid
steep declines in Hong Kong. Dow drops 216 points, finishing at
7873. Congress blocks Clinton''s request for $18 billion in
funding for the IMF.
September 23rd -Pushed by the New York Federal Reserve, a
consortium of leading US financial institutions provides a $3.5
billion bailout to Long Term Capital Management, one of the
largest US hedge funds, amidst fears that a collapse could worsen
the panic in the financial markets. Dow had risen 257 points that
day to the 8154 level, before the LTCM hits.
September 24th - Stocks on Wall Street and in Europe swoon
amid fears that the losses suffered by the world''s largest banks in
the LTCM debacle could put the entire banking system at risk.
Dow: 8001.
September 29th - Fed cuts interest rates by a quarter point. Dow:
8080.
September 30th - Worries that the Fed isn''t doing enough to
rescue the US and global economies cause a 238 point drop in the
Dow, 7842. Yield on 30-year Treasury drops below 5% for the
first time in three decades.
October 1st - Dow drops another 200-plus points, now at 7632.
Loss stands at 520 points since 9/23.
October 8th - Amidst a series of meetings between the IMF and
the World Bank, the Dow hits its intraday low of 7399 before
staging a spectacular rally at days end to finish the session at
7731.
October 15th - Fed cuts interest rates for a second time to prevent
weak financial markets from tripping the US into a recession.
The Dow rockets 331 points and world markets rally.
October 31st - The IMF refuses to disburse to Russia a $4.3
billion installment of the $22.6 billion aid package it agreed to in
July as it mandates that Russia produce a realistic budget for
1999. Dow: 8592 (10/30)
November 13th - IMF, World Bank and leading industrial nations
announce a $41.5 billion rescue package for Brazil. Dow: 8919.
November 17th - The Fed, citing "unusual strains" in the credit
markets, cuts interest rates for a third time in seven weeks.
Dow: 8986.
The market continued to rally in the US, albeit in fits and starts,
hitting an intraday high of 9390 on 12/30 before stumbling later
that day and New Year''s Eve to finish 1998 at 9181.
Next week, analysis of the Russian Crisis from George Soros and
others.
[Source: PBS "Frontline" program supplied this terrific timeline.
I added the Dow figures].
*I will resume the normal schedule for Wall Street History
(Friday''s) next week.
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