Investors on brink as Dow Jones plunges.
With billions of pounds already wiped off the value of leading British companies last week, the City is bracing itself for further heavy losses when trading resumes after the Bank Holiday break.
And the double whammy of the fall in the Dow Jones and the Russian crisis is likely to fuel further fears that the British economy could be sucked into global recession.
Hopes of a quick end to the chaos in Russia ended when members of the Communist-led lower house of parliament overwhelmingly rejected Viktor Chernomyrdin as prime minister.
Mr Chernomyrdin, who is President Boris Yeltsin's choice for the post, had appealed for their backing saying the economy was in danger of collapse.
British companies last week saw billions wiped off amid fears the continuing political and economic uncertainty in Russia could trigger a world recession.
On Friday alone the FTSE-100 Index of leading shares dropped 119 points, reducing the value of top UK businesses by about pounds 20billion.
While the City was closed for the Bank Holiday, confidence in the American markets continued on a downward spiral throughout the day, resulting in the Dow Jones suffering its second-biggest point loss ever at the close of trading.
The Dow blue-chip industrial index lost 512.61 points - or 6.4 per cent - to close at 7,539.07, wiping out all of its gains for the year and nearly 20 per cent below its alime closing high last July 17 of 9,337.97.
The Dow ended 1997 at 7,908.25.
The market took wide and deep hits as investors, suffering jitters amid news of the parliamentary showdown in Russia and North Korea's apparent firing of a missile over part of Japan, continued last week's rush of selling.
In Japan the benchmark Nikkei Stock Average had earlier regained some of the ground it lost on Friday when it hit a 12-year low.
News that one of the Japan's biggest banks may get new capital pushed the Nikkei up 192.26 points to 14,107.89.
Much depended on how Wall Street and the Far East performed for the direction the London market takes today.
Mr Justin Urquhart Stewart, business planning director of Barclays Stockbrokers, did not want to predict how the Footsie would start, but stressed the direct impact of the Russian economy on the west was not huge.
But, he said, economic problems in Japan and Asia are more significant.
Mr Urquhart Stewart said: "The Russian issue is not so much a financial issue, it's an issue of political confidence.
"Anything that happens which upsets market confidence will send it lower. The value of the Russian economy and trading links are not that large and are not going to have that much of a major impact."
In Hong Kong - the Far East's second most important market - shares fell sharply as the government reduced its role in trading.
It has has been buying stocks for two weeks to drive the Hang Seng Index to a level at which speculators who bet on stock prices falling would lose money.
Yeltsin's premier / Page 9
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