But the fundamentals are still very good - we have a steady growth low inflation environment

But the fundamentals are still very good - we have a steady growth, low inflation environment. There is still scope for European interest rates to fall, and they are certainly not going to go up.A grinding downward move in the US need not hit the European markets. If people had been in a really bearish mood, they would have alighted on the strong US housing data as another reason to sell. I'm reasonably sanguine about the outlook.Richard Davidson,Morgan Stanley`This is not like 1987, or 1994 when the bond market crashed.

But it might have been better in the long run if there had been a genuine bloodletting now. If the market goes up now there is a danger that people will take the chance to sell - there could be a reaction to the reaction to the action.Bob Semple, NatWest Markets`There was an overreaction on Friday and there has now been time to reflect There is no real crash on the cards. Shares in Singapore and Sydney also lost more than 3 per cent.Comment, page 19What the pundits sayNick Knight, Nomura`A bounce on Wall Street after the decline was pretty inevitable. It closed 820.34 points lower at 10,397.45, the second largest one-day points loss and the Hong Kong market's fifth biggest percentage collapse.Tokyo, which had opened relatively firmly, took its cue from Hong Kong, falling to the year's closing low of 19,796.29, a drop of almost 2 per cent as buyers remained sidelined by worries over the budget impasse as well as Wall Street. Hardest hit was Hong Kong, which suffered its worst fall since 1987, after the Chinese Foreign Minister Qian Qichen said Taiwan's first direct presidential elections on 23 March were part of a plot to win independence for the island.Peking takes over control of Hong Kong from Britain in July 1997, and the renewed tension over Taiwan has done nothing to calm local investors' fears about the handover.The Hang Seng index of Hong Kong's blue chips plunged 7.3 per cent as sellers focused on fresh Chinese military exercises off Taiwan. If people had been in a really bearish mood, they would have alighted on the strong US housing data as another reason to sell.

I'm reasonably sanguine about the outlook."But in the Far East, the combination of Wall Street's fall and the heightening tension between China and Taiwan wreaked havoc on Asian stock markets. "I believe the market is changing character."Steven Leuthard of the Leuthard Asset Allocation Fund noted: "This isn't a bear market, but there is one out there somewhere".Dealers in Europe had braced themselves for another sell-off yesterday but there was no feeling that a repeat of the 1987 global crash was on the cards.In London, a futures trader on Liffe said: "I don't think this market is trading with a lot of rhyme or reason at the moment."Bob Semple, markets analyst at NatWest Securities, poured cold water on the worst scare stories: "There was an over-reaction on Friday and there has now been time to reflect There is no real crash on the cards. Also critical, will be US inflation figures due to be released on Thursday and Friday."I think we're entering a much more interesting market, a much more volatile market," commented Ricky Harrington, an analyst at Interstate-Johnson Lane. "Friday was not the end of the a bull market and the beginning of something bad."In staging its recovery, Wall Street seemed to shrug off the latest economic statistics that showed a 4.2 per cent increase in sales of single-family houses in January, further suggesting a strengthening of the economy. Analysts had expected house sales to retreat.Even so, Wall Street is likely to remain jumpy all week. Attention will be closely focused on the bond market, which is likely to remain highly sensitive to any further evidence of a strengthening of economic growth. The figures in turn buried hopes of any further cut in interest rates by the US Federal Reserve.

Bonds suffered their worst day in almost two decades.By the evidence of yesterday, most investors seem to have taken the view that the trend on Wall Street remains upwards. "The market is proving this morning that it's trying to go higher," remarked William LeFevre of the brokerage firm Ehrenkrantz King Nussbaum. Many analysts had been predicting a retreat of 10 per cent before the selling was over.Friday's retreat had been sparked by surprisingly strong February jobs reports, including a drop in the unemployment rate from 5.8 to 5.5 per cent. The day was in stark contrast to Friday, when the 171-point slide in the industrial average, the third biggest in its history, sparked fears that a more significant correction was in the offing.