Concerted Slide Hits World Markets

June 24, 2002

Markets around the world slumped on Monday as separate but simultaneous bad news hit home in London, Paris, Frankfurt and New York.

Overshadowing it all was the relentless slide in the value of the dollar, now almost at parity with the euro, and the deepening worries about the fragility of the US recovery.

The dive pushed the New York-based Nasdaq index, the bellwether of the technology sector, as low as 1,415.73 in early trading.

This was lower even than the 1,423.19 trough seen immediately following the terrorist attacks of 11 September.

Monday's Falls at 1609 GMT:

London, FTSE 100: 4,541.9
-63.4 (1.38%)

Paris, Cac-40: 669.24
-130.29 (3.43%)

Frankfurt, Dax: 4,087.50
-149.65 (3.54%)

New York, DJIA: 9,115.47
-138.32 (1.49%)

Nasdaq composite: 1,417.93
-23.03 (1.6%)

S&P 500: 974.30
-14.84 (1.5%)

The bounce back from that level in November last year was founded on hopes that the consequent dip would be shortlived.

But corporate performance and economic evidence since then now makes that look like false optimism.

Battered bourse

Monday's performance was put under further pressue by more indications that companies on both sides of the Atlantic were having a hard time recovering from last year's downturn.

The tone was set in Europe as Germany's Dax and France's Cac-40 both registered triple digit falls by mid-afternoon.

In Frankfurt, a rejig of German shares based on the value of shares only freely tradeable in the market punished giants like Deutsche Telekom, still majority-owned by the government.

Emergency refinancing talks between power technology group Babcock Borsig and its banks pushed financial stocks sharply lower, while insurers suffered amid the general despondency.

In France, traders were alarmed by reports of a cash shortage at media giant Vivendi.

The company's shares fell more than 10% after it sold off part of its utility arm, Vivendi Environnement - just days after parking another slice with Deutsche Bank in a so-called share repurchase deal.

France Telecom and its mobile unit, Orange came into the firing line too, after Moody's credit rating agency said their debt was little better than junk status.

Techs under suspicion

In the UK, the falls were less stark, but nonetheless the mood was grim thanks in part to a deeply pessimistic analysis of the media market from advertising group WPP.

But the tech sector came in for a battering in London as well as elsewhere, with mobile group Vodafone touching four-and-a-half year lows and competitor MMO2 sliding after a negative report from Goldman Sachs.

And once the European selloff was in full swing, New York's 1330 GMT opening simply accelerated the trend.

Again it was Goldman Sachs in the midst of the falls, warning its clients that tech stalwart IBM is likely to underperform both this year and next.

That hit hardware makers, while telecoms stocks suffered on the bad news for their transatlantic rivals.

Phone companies were also hit by further signs that bankrupt carrier Global Crossing may have tried to evade a federal investigation.

Meanwhile, WorldCom edged closer to the abyss as its shares fell below $1 after Salomon Smith Barney cut estimates.

Allegations of further illicit activity at investment banks - staff suspended at Merrill Lynch and a lawsuit by aggrieved insurers directed at JP Morgan's work for Enron - poisoned the chalice still further.

http://news.bbc.co.uk/hi/english/business/newsid_2063000/2063054.stm