London stocks drop sharply Thursdaygreenspun.com : LUSENET : Unk's Wild Wild West : One Thread
Thursday March 22, 05:55 PM
FTSE 100 plunges 4.1 percent
By Keiron Henderson
LONDON (Reuters) - The FTSE 100 has plunged 4.1 percent in its biggest one-day fall since October 1992, hit by a slide in banks and worries that the impact of the slowing U.S. economy was beginning to be felt in Europe.
As much as 52 billion pounds was wiped off the value of leading stocks as the blue chip index closed 225.9 points down at 5,314.8, its lowest finish in 29 months. The fall came as Wall Street pushed lower yet again and a batch of companies warned about earnings, pointing the finger at the U.S. economy.
"Investor confidence is collapsing, a lot of people are just throwing in the towel and no-one has any intention of buying," said a senior trader.
A profit warning from controls and automation group Invensys sent the stock down 10 percent, heightening concerns about pressure on corporate earnings, while banks were seen ripe for profit-taking as well as vulnerable to recession.
Banks as a group sliced 50 points off the FTSE 100 with Barclays down 5.8 percent and HSBC off 5.2 percent. Telecoms took 41 points off the FTSE as Vodafone lost 5.2 percent and BT five percent.
Fund manager Amvescap was a major FTSE faller, off 13.1 percent amid concerns over the impact of investor sentiment on its significant U.S. business.
"They (the bank stocks) had a good year last year, but on fundamentals people are worried about economic slowdown, they are going to start talking about debt delinquency and the quality of the loan book," said one senior dealer.
"Amvescap is getting tanked because of the shape of the U.S. market, people are so pessimistic they're wondering if anyone will ever invest ever again in any equity market," he added.
The profit warning from Invensys, its second in six months, blamed a steady deterioration of its markets in the United States on weaker industrial and consumer confidence.
It said it had stepped up a programme of layoffs and 5,000 jobs would be cut by the end of its financial year.
As if on cue, the Confederation of British Industry employers' group said that the UK was starting to feel the impact of the U.S. economy's problems.
"The U.S. slowdown may have a more serious impact on the UK than first predicted. Higher stock levels and falling demand are already causing companies to rein back their output plans," said CBI chief economist Kate Barker.
Strategists said the market was bracing for fresh trauma from the first quarter U.S. corporate earnings season which kicks off in April.
"Clearly there's a chance of a bounce, but the market's essentially discounting bad news in April when you've got all the first quarter earnings coming out in the U.S. tech stocks," said Martin Brooker, European equity strategist at Credit Lyonnais Securities.
Speciality drugmaker Shire Pharmaceuticals Group was the biggest FTSE 100 loser, dropping nearly 14 percent, caught up in the general sell-off after recent arbitrage volatility. It said it was sticking to its share-swap deal to acquire Canada's BioChem Pharma, despite the fall.
Shares in telecoms firm Energis Plc fell 3.4 percent, extending Wednesday's 12.9 percent fall as a dispute with one of its largest shareholders, Swiss information technology group Distefora Holding AG, rumbled on and the sour mood in the telecoms sector bit deep.
Energis dropped on Wednesday after it said Distefora sold shares in breach of a lock-up deal, a claim which the Swiss firm denied.
Cable company Telewest Plc shed 11.7 percent as it reported a widening bottom line loss for 2000 but said it hit its digital sales target after a very tough year.
Software and consultancy company Logica was among the worst performers early on, falling nearly 10 percent to a one-year low before rallying to close 5.3 percent lower.
The sector was responding to the 1.5 percent overnight fall in the Nasdaq and another after-hours profit warning from a U.S. tech stock, Dallas Semiconductor.
The Nasdaq was down 1.2 percent by the time London closed, while the Dow Jones Industrial average was registering a 270 point loss.
Mid-cap engineer Laird Group Plc was another firm to warn that the U.S. economic slowdown would hurt profits, saying that first half figures would be significantly hit. The shares lost over a quarter of their value, falling 74 pence to 196p, their lowest in nearly a year.
Building materials group BPB Plc blamed economic slowdown in North America for its warning that underlying pretax profit for the year to end March would not meet analysts' forecasts. BPB's shares shed 11.8 percent.
Some flecks of blue stood out amidst the FTSE's sea of red with energy company Powergen Plc the day's biggest gainer, up 3.8 percent as it said it was still in talks which could lead to a possible offer.
Food retailers were singled out for their defensive qualities with Safeway up two percent and J Sainsbury 1.3 percent higher.
Away from the FTSE 100 the Midcap 250 index closed 174.5 points or 2.9 percent lower at 5,929.7, while the FTSE techMARK finished 112.05 points or 5.7 percent down at 1,864.60.
CHARTS POINT SOUTH
Market watchers expect the FTSE's 1,615 point or 25.3 percent retracement from the December 1999 record high of 6,930 to continue pretty much unarrested for the foreseeable future.
The index has slumped 14.6 percent since the beginning of 2001, losing well over 10 percent in the last two weeks alone. While support at 5,300 held by Thursday's close, the next big support could be at 4,680, lows last seen in late 1997 and 1998.
"The 4,680 level is possibly achievable, although I wouldn't like to think so. If we get continued weakness in the financials, deterioration in industrials then the market can go considerably lower," said Dominic Hawker, technical analyst at independent research firm Stockcube.
"I'm certainly looking for the FTSE to fall below 5,000 probably within the next two months, but we may then be on an upward path. I think we're going to see the point of maximum risk over the next four to five weeks," said Credit Lyonnais Securities' Brooker.
-- (M@rket.trends), March 23, 2001