Techmark 100 suffers biggest one-day decline

The London stock market suffered a big sell-off yesterday with telecom and technology stocks taking a battering.

The Techmark 100 index of leading technology stocks suffered its biggest one-day percentage fall - 8.7 per cent - since it was established in November.

The index fell 291.9 to 3,052.19, its lowest close since December 1st. It is now 47 per cent below its March 6th peak.

Sentiment in the sector was badly affected by the collapse of Boo.com and by Thursday's fall on Nasdaq. There was also another computer virus and a profits warning from Parity group, one of the star FTSE 250 stocks of the first quarter.

Telecom stocks were also badly hit as investors continued to fret about the cost of the new generation of mobile phone licences. Vodafone AirTouch's decline was alone worth about 70 points off the FTSE 100.

The mood was also far from positive on Wall Street. The US trade deficit for March was $30.2 billion, a bigger figure than expected and an indication of the strength of consumer demand for imports. Some analysts see the deficit as unsustainable with the only remedies being a collapse in the dollar or a sharp dip in consumer demand.

US shares were weak from the outset and the Dow Jones Industrial Average and Nasdaq Composite were both showing triple-digit losses by the time London closed. Analysts think the Federal Reserve will have to keep raising rates to slow the US economy.

All this left the FTSE 100 with a loss of 187.5 to 6,045.4. At its worst, the index was down 193.8 at 6,039.1. Thirteen constituents were down more than 10 per cent, including Energis, Baltimore and Psion. Over the week, the index was down 3.8 per cent and it has dropped 12.8 per cent since December 31st. The few stocks to gain ground were old economy stalwarts such as National Power, Diageo and Unilever.

The FTSE 250 also suffered heavy losses, dropping 103.7 to 6,183.7. Seventeen of its constituents had double-digit losses. The SmallCap slipped 23.4 to 3,199.6.

There were clear signs that investors were starting to lose hope that the TMT stocks could quickly regain the heights reached in the first quarter. The price-earnings ratio on the sector remains above 80.

"Valuations still suggest a degree of caution on the TMTs (technology, media and telecoms) is appropriate," said Mr Bill McQuaker of Credit Suisse First Boston in his latest quantitative analysis. "Investors are still paying a substantial premium for medium-term market growth."