The negative mood quickly spread to other highly-rated stocks, and profit takers emerged among recent star performers such as telecoms and financials.
The bearish mood kicked the FTSE 100 off its pedestal. The blue-chip index started the day from the comfort of another all-time peak but quickly fell out of bed, finishing 195.5 points off at 6,319.8. It was the second- biggest point fall since the crash of 1987, but most market players were unruffled and seemed more concerned with some bomb hoaxes in a couple of City institutions.
A heavy sell-off of techie stocks on Nasdaq on Monday, coupled with an uncertain start for the Dow yesterday, were seen as the chief culprits. Traders also said the London fall was due more to a lack of buyers than a rush to sell. The turnover figure - over a 1 billion but below the 1.4 billion registered on Monday, lent weight to the buyers' strike argument.
The undercard took a smaller pasting. The FTSE 250 lost 95.8 points to 5,753.6, while the small cap fared even better, ending a mere 16.6 points off at 2,473.0.
A few resilient takeover rumours survived the minor market bloodbath. Greenalls, the pubs and De Vere hotels group, fizzed 8.5p higher to 345.5p after the return of the old chestnut of a bid from a rival beer group. Bass, up 23p to 898p, is the hot tip. There are whispers of an offer of 480p a share, valuing Greenalls at about pounds 1.2bn. Old favourite Whitbread was also the subject of some bar talk, serving up a 31p advance to 1,038p. Greenalls will be a great catch for Whitbread, as it would boost its David Lloyd fitness clubs and add a sizeable chunks of pubs. The prospect of a takeover of Greenalls triggered hopes of a bid for the regional hotelier Swallow Group, which booked a 12.5p rise to 317.5p.
Bass and Whitbread were two of only 11 blue chips to rise on the day. Imperial Chemical Industries was the leader of this thin pack, putting on 32p to 705.5p as buyers moved in ahead of tomorrow's results. Positive noises on the beleaguered chemicals sector from BT Alex. Brown also helped.
Reckitt & Colman benefited from its defensive qualities. The Harpic-to- Lemsip group cleaned up with a 18p rise to 679.5p. Reckitt was aided by speculation that it has been chosen by Warren Buffett as his favourite blue chip.
Two other alleged Buffett targets, Marks & Spencer and Diageo, were also on the up. M&S bagged a 11p rise to 444.25p, while the Guinness brewer rose a smooth 12p to 688p.
The meagre list of FTSE 100 risers was completed by SmithKline Beecham, which injected a 14.5p jump to 826p, and Daily Mail, up 23p to 3,285 after Schroders upgraded its forecasts.
The other takeover rumour of the day centred on Northern Foods. The chilled food maker cooked up a 7.5p rise to 115.5p on vague talk of a strike by its bigger rival Associated British Food. The fact that ABF, down 9.25p to 434.25p on brokers' downgrades, will still have around pounds 1bn in the kitty after its proposed pounds 448m cash-back, excited dealers' minds.
The fallers' chart made sorry reading for Internet, computer and telecoms stocks - the recent market stalwarts. Dixons, the electrical retailer with an Internet twist, shortcircuited 108p lower to 1,230p as the Web link that has propelled the shares to absurd heights came back to haunt it. The computer services group FI crashed 37.5p to 287.5p, followed by the software maker Sage, down 192.5p to 1,925p. Even the all-conquering Psion bowed to the pressure, sliding 77.5p to 870p.
The fall-out from the Nasdaq sell-off hit the FTSE 100 newcomer Energis. The telecoms group rang up a 137p loss to 1,551p. Another high-flyer, Colt Telecom, slumped 83p to 1,070p as ABN Amro said "overvalued".
Fellow telecoms providers Telewest, down 20p to 252.75p, and Cable & Wireless Communications, 31.5p lower at 658.5p, felt the pinch of a regulatory probe. Reuters dug its own grave, falling 70.5p to 861.5p on poor first- quarter figures.
CGU slumped 37p to 940p after warning that trading conditions in the general insurance market remain tough. Rival Sun Life & Provincial fell 36p to 529.5p.
Kingfisher was another big loser, shedding 50p to 746p. The latest slump values the Woolworths-to-B&Q bid for Asda at a mere 169p per share. Asda was trading well above that yesterday, finishing at 183.75p despite a 10p fall. When Kingfisher launched its all-paper bid, it valued each Asda share at 198p.
Prudential lost 23p to 787.5p despite good new business figures, just like fellow insurer Legal & General, down 15p to 718.5p. NatWest had a 44p deficit at 1,522p despite an upbeat trading statement. Fears of a holiday price war sent Thomson Travel 16p lower to 159p, while Airtours, still mulling an offer for First Choice, nosedived 35p to 453.5p
St Ives, the paper group, inspired brokers with a positive set of figures and soared 49p to 530.5p. Hepworth was nearby in the FTSE 250 biggest risers' chart; the boilermaker sparked 14p higher to 195p as old talk of a overseas bidder resurfaced. Hepworth could also bid for Polypipe, up 0.5 to 209.5p.
Among the minnows, the crockery maker Denby posted a cracking 24.5p advance after announcing that it is in offer talks. Portmeirion, up 5p to 147.5p, and John Tams, flat at 17.5p, were dragged into the bid frenzy.
Ivernia West, an Irish mining company, dug up a 6p advance to 44p after taking a stake in an Australian lead mine. Jurys Hotels rose 9p to 557.5p after launching a pounds 187.6m bid for fellow Irish host Doyle Hotel. Vague talk of a bid for the chemical group Yorkshire left the shares unchanged at 112.5p.
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