Investors frown as tech woes spread gloom

A seventh straight decline for the FTSE 100 index left investors in a gloomy mood about the prospects for the UK market.

"I fear the bad news may be spreading from the tech sector to the old economy," said one leading fund manager as Footsie dropped 76 points to 5,391.9, its lowest close since March. Footsie is now down 22 per cent from its end-1999 peak of 6,930.2, meeting the standard definition of a bear market. The bad news was pretty broadly spread.

Technology stocks were hard hit once again, after a profit warning from Compaq late on Tuesday and another from Comverse Technology yesterday. The Nasdaq Composite, which closed below 2,000 on Tuesday, failed to rally in early trading. Psion added to the gloom as the hand-held computer maker said it would stop making new consumer hand-held products. Technology, media and telecom stocks made up 12 of the 15 worst performers in the FTSE 100 and the Techmark 100 fell 41.55 to 1,544.91.

Vodafone added to the woes of the sector, and the overall market, by falling to its lowest closing level since October 1998.

Invensys was the second worst performer in the FTSE 100 following yet another profit warning, this time from Emerson Electric of the US. And, to round off the bad news, the banks were dragged down by downgrades from leading brokers.

It was one of those days when Footsie was always in the red. There was a brief rally in early afternoon as the Dow Jones Industrial Average opened strongly but when Wall Street faded, so did London. At its worst, just before the close, the blue chip benchmark was down 87.5 at 5,380.4.

The FTSE 250 held up a little better, off 28.7 at 6,126.1 but the SmallCap slipped almost 1 per cent, dropping 27.4 to 2,779.2.

Apart from Wall Street, the international outlook was poor with Tokyo down sharply, European markets off more than 1 per cent and emerging market currencies and bonds hit by renewed worries about Argentina's debt problems.