The London market suffered yet another dismal day as US profits warnings undermined sentiment on both sides of the Atlantic.
Ariba, Broadvision and Redback Networks were merely the latest US technology companies to issue warnings, while in Europe the bad news was compounded by reports of job losses at Alcatel, and Nokia's decision to extend further credit to the mobile phone operators.
The FTSE 100 index fell 155.4, or 2.8 per cent, to 5,463.1, wiping out the bulk of last week's rally in the blue-chip benchmark. The index is now 21.2 per cent below its all-time high of 6,930.2.
The worst damage was in technology stocks with a raft of companies suffering declines of 10 per cent and more, including former market favourites such as CMG, ARM, Logica, Marconi, Baltim ore, Psion, Autonomy and Bookham.
The beleaguered Techmark 100 index continued its remorseless decline, falling 136.7 to 1,771.02, a new low. The index was founded in November 1999 and reached a closing peak of 5,743 in March last year; it has now fallen almost 70 per cent from that level. The broader market was also weak with the FTSE 250 falling 90.5 to 6,016.4 and the SmallCap index dropping 55 points to 2,829.8.
Turnover picked up from Monday's levels but, at 1.99 billion by the 6 p.m. count, did not seem to represent the type of "selling climax" that supposedly marks the bottom of bear markets. Private investors were clearly active, with 136,000 individual trades reported. Most strategists are currently bullish about the UK market but Richard Crehan and Graham Secker of Morgan Stanley Dean Witter are notable exceptions. In their latest strategy note, they say: "It is eminently plausible for the UK market to fall to third-quarter 1998 crisis levels. The weak link in the financial system could stem from the massive increase in corporate debt seen in the last two years. The build-up in debt has financed massive overcapacity, most of all in technology. This is leading to a margin crunch, destocking and profit warnings as the US, and global, economies contract."
However, Crehan and Secker felt that the UK market could outperform the rest of Europe, if only by falling less.
