It should have been party time. A 400-point gain in the Dow Jones Industrial Average on Thursday and a near 9 per cent rise in the Nasdaq appeared to set the UK market up for a bumper day.

But the champagne corks failed to pop. The first party pooper was Autonomy, the UK software company, which warned late on Thursday of a sudden slowdown in European orders. This was seen as a sign that European technology groups were about to suffer the same problems as their US counterparts as companies cut back on their technology spending.

Mr Richard Gaunt, Autonomy's chief technology officer, said: "A lot of the external views are that there's a mild slowdown, but as far as we're concerned this is a sign of a very sharp, sudden recession globally". Autonomy, which was in the FTSE 100 until last month, saw its shares fall more than 42 per cent.

The second damp squib came in the form of an unexpected 86,000 decline in US non-farm payrolls in March, which indicated that the US economy may still be on the verge of recession. The figures disappointed investors who were hoping, in the wake of some recent improvements in US data, that an economic rebound was already under way. Average earnings growth, at 0.4 per cent, was also higher than analysts had expected. This either means inflation is pushing up or profit margins are being squeezed.

Adding to the gloom was yet another set of US profit warnings from the likes of RadioShack, Tellabs, and Sycamore Networks. The Dow and Nasdaq duly gave back some of Thursday's gains when trading opened in New York, with the Dow down more than 200 points at one stage.

All this spelled doom for the London market's early attempts to maintain its recent rally. After an early gain of 63.8 to 5,685.6, the FTSE 100 index spent much of the day in negative territory. By mid-afternoon, the blue chip benchmark was down 78.7 at 5,543.1. A late rally allowed Footsie to restrict its loss to 20.3 points for a close of 5,601.5.

But there was no respite for the Techmark 100, which took the brunt of Autonomy's fall. It dropped 56.86 to 1,780.11. To add to the sector's woes, a report from the Mobile Data Association said that the volume of text messaging over mobile phones had declined in February. Text messaging had been seen as a big growth area for the mobile industry.