Soap firm's profit alert puts City on sharp slide
The bubble had to burst, but although there were plenty of stresses and strains affecting the Internet stocks it was the collapse of the soap bubble that blew holes in London markets yesterday.
The culprit was a profits warning from Procter & Gamble, the world's largest consumer goods company and famous for its soap powders. Its shares fell by more than 30 per cent and that was enough to unnerve the Dow Jones Industrial Average, which saw an initial 58 point gain turned into a 323 point fall at its worst during London hours.
London could not ignore the pace of such a decline, although it had put up a resolute resistance to plenty of downside pressures during the morning and early afternoon periods.
Those early pressures came in the form of a double warning from two of the biggest guns in the US - Mr Arthur Levitt, chairman of the US Securities and Exchange Commission (SEC) and Mr Alan Greenspan, chairman of the US Federal Reserve.
The SEC chairman fired off the first shot at the market, highlighting what he called a "casino mentality" of the surge in hi-tech type stocks, while the Fed chairman spoke again about the overheating of the US economy.
That was expected to carve lumps out of the FTSE 100 at the start.
And matters were made even worse following news that NTL, the US cable/ telecoms/communications group, is following AltaVista in launching free and unlimited Internet access to its telecoms customers, a move guaranteed to hit the likes of Freeserve, the Internet service provider, and BT.
In the event both stocks foundered, but the overall market, although lower, proved extremely resilient, that is until the Procter & Gamble bombshell exploded.
With the Dow plummeting, the FTSE 100, which had managed to claw its way into positive territory shortly before Wall Street opened, dropped like a stone, sliding 102.3 at worst, before finishing the day a net 101.3 lower at 6,466.5.
That ended a sequence of five straight winning performances which had seen the 100 index up 468.2, or 7.7 per cent.
The more junior FTSE indices fared better than the 100 but were also unhinged by the Dow's retreat.
The FTSE 250 settled 49.6 down at 6,789.3, while the FTSE SmallCap eventually relinquished its earlier gains which had taken the index up to an intra-day peak of 3,537.0 to finish 0.7 off at 3,520.0. The worst performance of the lot came from the Techmark 100, which dropped 141.8 to finish at 5,601.41.
The London market now has to contend with today's meeting of the Bank of England's monetary policy committee, which will debate and determine British interest rate policy; its decision will be announced at midday tomorrow, with the market not expecting any shift in rates following the dove-like comments by committee members recently and ahead of the March 21st budget.