A shock profits warning from Admiral sparked a wave of selling in the highly-rated IT stocks. The plight of the hi-tech brigade was the defining feature of a bearish day which saw the FTSE 100 take a three-figure tumble.
Admiral led the way downwards, losing over a quarter of its market value. The computer services group shed a chunky 277.5p to 790p after warning that first-half profits would be hit by overstaffing and a slowdown in one of its key projects. The company did not name the project's client, but traders speculated that a major bank or telecoms company may have decided to reduce its IT spending.
The statement fuelled the market's worries that the IT bonanza is coming to an end. Software-fixing companies have had an astonishing run in the past few years as the millennium bug and the euro launch boosted demand for their costly services.
But with the euro in place and the year 2000 on its way, many believe that IT stocks and their gigantic price/earning ratios are due for a correction. The poor sentiment has been heightened by some sharp falls on the technology- laden Nasdaq index in the US.
The IT bears were out in force yesterday, selling the blue-chip high flyers Misys, down 44.5p to 532.5p, and Sema, 44.5p lower to 550p. On the IT undercard, FI Group tumbled 35p to 295p, Logica 48.5p to 540.5p, CMG 129p to 1,586p, Sage 142.5p to 1,937.5p and Guardian IT 39p to 572.5p. Overall the software sub-index was down by 7 per cent.
The FTSE 100 fared little better, closing 131.4 points lower at 6,401.7 as US and domestic interest-rate worries took centre stage. A 100-plus fall in the Dow overnight set the bearish tone at the start of London trading.
The gloom deepened in the afternoon when Wall Street opened lower amid fears that US rates are going up. Jitters over today's interest-rate decision by the Bank of England also lurked, and the blue-chip index closed at its lowest level of the session. The undercard was hit by the leaders' malaise, with the FTSE 250 closing 42.7 points down at 5,844.8, while the small cap lost 10.6 to 2,573.2.
The bearish winds boosted traditional defensive stocks. Utilities soared for the second day as investors looked for safe havens and high yields. Scottish & Southern Energy led the way, rising 32p to 614.5p, followed by Severn Trent, up 39.5p to 877p. Scottish Power surged 18.5p to 542p; today's results should provide some news on the sale or float of its Scottish Telecom unit. Powergen, up 29p to 723p, and British Energy,19p higher at 568p, completed the utilities' feast.
Sainsbury rose 6p to 410p amid renewed talk of a sale of the sizeable family stake. Whitbread, up 29p to 1,115p, was boosted by its talks to buy the pubs owned by Allied Domecq, 2p higher to 545p as CSFB upgraded. Bass, 43p better at 1,000.5p, and Scottish & Newcastle, up 12p to 784p, benefited from hopes of further consolidation.
Woolwich cashed in a 1.5p rise to 401.75p. Developments over its mortgage securitisation venture in the US are believed to be imminent. Reckitt & Colman shed 4.5p to 745.5p despite vague talk of a strike by Colgate.
BSkyB's decision to give away the digital TV kit for nothing, establish its own free Internet service and offer cut-price phone calls caused a few ripples among the techies. Rupert Murdoch's company soared 65.5p to a 12-month high of 607p as the market got hooked on the idea. Its ally Flextech rose 36p to 914.5p. Sky's audacious move put rival ONdigital on the back foot; its co-owners Carlton, down 48.5p to 544.5p, and Granada, 24p lower at 1,343p, will have to respond soon.
Dixons shed 102p to 1,233p on Sky's Internet foray. Telewest Communications lost 17p to 254.5p amid fears of a cable price war. Would-be merger partner Cable & Wireless Communications fell 81.5p to 627p despite announcing its own digital TV plans.
On the undercard, sausage-skin maker Devro sizzled 15p higher to 150p. A stock overhang was cleared and talk of a 200p-a-share management buyout returned.
Condom maker London International Group rose 1p to 178.5p amid rumours that a foreign buyer will trump the merger with Seton Scholl, down 2p to 825p. Publisher Charterhouse Communications rose 2p to 21.5p after confirming bid talks; Columbus Group, unchanged at 36.75p, is the mooted bidder.
Sugar company Tate & Lyle lost a sour 7.75p to 432.25p amid rumours of a boardroom bust-up. Insurer Benfield & Rea was flat 114p; a big line of stock moved, with some mentioning interest from George Soros.
Antonov motored 17.5p ahead to 58.5p on progress of its new gear system.
SEAQ VOLUME: 1.1bn
SEAQ TRADES: 82,153
GILTS INDEX: 109.12 -0.12
MINMET, a small mining group, was among the market's biggest risers yesterday amid talk of a large find. The Irish driller soared 2p, or 27 per cent, to 9.5p, with over 7 million shares traded.
There are whispers that Minmet might have discovered a large quantity of gold in one of its South American developments. The find, possibly in Brazil, could boost the shares, which hit a high point of 10.75p last year.
THE CHINA manufacturer, Royal Doulton, could be in the sights of a predator. The shares rose 14p to 143.5p yesterday after two US funds disclosed an 8.6 per cent stake.
Insiders believe that an American predator could have been attracted by reports that a European or another US group was having a look at long- suffering Royal Doulton, whose shares have slumped from their peak of 226p reached last summer.Reuse content