90 Billion Euros Wiped Off Market Value in Minutes

July 19, 2002

LONDON (Reuters) - Europe's biggest companies had 90 billion euros wiped off their market value at the open on Friday after U.S. shares slumped to fresh five-year lows in late trade on Thursday and as Ericsson posted gloomy earnings.

The world's biggest maker of mobile networks reported a worse-than-expected second quarter loss of 3.5 billion Swedish crowns, its seventh straight loss, and announced a long-awaited $3.25 billion rights issue.

That hit Ericsson shares hard in unofficial trading and knocked fellow telecom equipment makers Alcatel and Nokia down between 5.1 percent and 6.7 percent.

Epcos AG added to the tech gloom after the German electronic components maker unexpectedly announced a loss for the third quarter and said it saw no improvement in the fourth quarter, pushing its shares down by 13 percent.

"It's worrying that companies are not managing to transfer the seemingly good macroeconomic data into good profit growth, which indicates some sort of structural problem," said Sharon Coombs, European strategist for HSBC.

That echoed talk earlier in the year of a 'profitless recovery', although a weak Philadelphia Fed survey after most European markets closed on Thursday suggested the U.S. economy was flying into fresh turbulence anyway.

The FTSE Eurotop 300 index of pan-European blue chips lost 2.27 percent and headed back toward four-year lows, while the narrower DJ Euro Stoxx 50 index lost 2.8 percent.

The technology sector is expected to remain the main focus through the morning, with German chipmaker Infineon Technologies also due to report later, though exporters could attract some unwelcome attention after the euro rallied to fresh 2 1/2 year highs against the dollar.

On a better note, shares in struggling British bank Abbey National rose 2.7 percent after Chief Executive Ian Harley stepped down without giving reasons, ahead of next week's second quarter earnings.

In New York, the blue chip Dow Jones industrial average closed down 1.56 percent to its lowest level since September, but the broader S&P 500 fared even worse, tumbling 2.7 percent to its lowest level since June 1997.

The tech-laden Nasdaq Composite ended down 2.88 percent, also near its five-year low.

Losses were extended in after-hours trade after the U.S. maker of computer servers, Sun Microsystems, forecast a slight loss in the current quarter, having returned to profit in the three months to end-June for the first time in five quarters.
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