Bourses take pounding as US recovery hopes recede

European stock markets slumped to late-September levels yesterday as investors dumped stocks, leaving no corner of the market untouched as doubts over US economic recovery deepened with no let-up in sight.

Europe's technology and telecom sectors visited levels last seen over five years ago, wiping out nearly all the record gains racked up during the dotcom boom.

In Dublin, more than €1.7 billion was wiped off the value of Irish shares as the ISEQ index of shares mirrored the falls elsewhere.

The ISEQ closed the day at its lowest level since the end of February as doubts about a US recovery hit European markets. Financial stocks were among the hardest hit, losing more than 3.78 per cent of their value.

"Most investors are sitting like rabbits in front of the headlights, just frustrated and shocked by the market, hoping that the future will cancel out their losses," said Mr Udo Becket, a trader at Munich private bank Merck Fink.

In London, the FTSE 100 index of leading shares plunged 3 per cent to close at 4,630.8 points.

That left the index down more than 10 per cent from the start of the year, and about a third below its all-time high of almost 7,000 points seen in December 1999.

In Paris, CAC 40 fell 2.9 per cent to finish the week at 3,843,07 points, like London its lowest closing value in 8½ months. The German DAX 30 index tumbled 3.72 per cent to 4,303.85 points.

The pan-euro zone Euro Stoxx 50 index slumped 2.73 per cent to 3,055.85 points, leaving the index down more than 20 per cent since the start of the year, and about just 6 per cent above its post-September 11th nadir.

Asian markets were also hit. Tokyo shares slid 2 per cent and the Hong Kong market dropped 1.2 per cent.

Mr Stephen Ford, an analyst at Brewin-Dolphin stockbrokers, said the falls were not so much a collapse as "a sustained and continued sell-off". He added: "The market is discounting a particularly messy end to the US bull market. Everyone is very concerned about the dollar, people are getting mentally prepared for quite a large correction in the US equity valuations," he said.

Elsewhere in Europe, Milan's Mib 30 index fell 1.90 per cent to 27,600 points and Madrid's Ibex-35 tumbled 2.31 per cent to 7,128.2. The SMI index of leading Swiss shares gave back 1.16 per cent to 5,980.7.

In Amsterdam, the AEX dropped 2.12 per cent to 429.95.

And analysts warned that there could be more pain ahead for European stock markets.

"We're now in spitting distance of last September's lows. It seems almost certain the markets will look to re-test those levels," said Bank of America equity strategist Mr Robert Kerr.

Strategists said equity investors were pricing in a recession that few economists were expecting.Stocks have been falling since March as investors began to doubt that economic recovery would rescue profits anytime soon. This week's US consumer-focused numbers fuelled the trend.

The market's drop has been led by techs and telecoms, two sectors where many companies have high debt and low demand.

Deutsche Telecom, once the vanguard of Germany's infant equity culture, sank 3.8 per cent yesterday to its first close below €10 at €9.82, having earlier touched €9.71.

France Telecom hit lifetime lows too, plunging 6.8 per cent to €15.35. British mobile heavyweight Vodafone saw its shares lose 3.7 per cent to 91.0 pence sterling.

"Today has been different from the past few weeks as we have seen real capitulation in the market as every stock and every sector is down," said Mr Khuram Chaudhry, a European strategist at Merrill Lynch.