They are worried that shrinking demand for Boeing and Airbus aircraft would cripple production of their British-made wings and engines. Broker ABN Amro reinforced the mood, advising clients to fasten their seatbelts and prepare for a bumpy ride in the sector.
British Aerospace was firmly on the bears' radar screens. The shares plunged over 4 per cent to 477.5p, as the market fretted over BAe's role in the Airbus consortium. Rolls-Royce, down 5p to 235p, was also without parachute. Positive noises from HSBC were not enough to lift the turbo- engine maker.
Siebe and BTR, the two electronic engineers engaged to be married, were also affected. The sector malaise combined with doubts over the merger to leave Siebe grounded at 201p, down 9p, and BTR 2.25p lower at 113.75p. The defence engineers' selling spree extended to LucasVarity, down 4.5p to 203.5p.
Smith Industries was the only one to take off, putting on 15p to 840p after the earnings-enhancing acquisition of the US electrocomponents group Entraco for $7.7m.
Footsie kept a low profile after the previous day's disaster. The blue- chip index closed down 30.3 to 5507.2. After a directionless start, sentiment was hijacked by a large opening loss in Wall Street, and a fragile Footsie closed at the day's lowest point. Volume broke through the 1 billion barrier for the second day running, helped by a number of tax-related deals and pre-Christmas book-squaring.
Scottish Power bucked the market trend to close up 23.5p at 657p, thanks to the return of recent rumours. Market insiders believe that the utility giant is preparing a spin-off of its telecoms arms or a long-awaited blockbuster buy in the US. It was denied the Footsie's top spot by Sema, up 20 to 470p, as the market corrected the previous day's rogue trade. Carlton tuned in to a series of buy recommendations after Tuesday's results. The ITV company finished 14.5p higher at 492.5p.
The undercard was hit by a retailers' collapse and a series of profit warnings, which left the mid cap 17 lower at 4804.4 and the small cap 2.7 down at 2036.8.
Arcadia, the Burton-to-Dorothy Perkins frock-maker, started the collapse. The Debenhams spin-off was left looking like a crumpled suit after warning of falling sales and increasing competition. The alarm enraged many analysts, who had been reassured that all was well a few weeks ago. They got their revenge with savage cuts to their earnings estimates and a barrage of downgrades.
Arcadia finished a dishevelled 26.2 per cent lower at 212.5p, the biggest faller in the FTSE 250. Its former parent Debenhams followed suit with a 21.5p fall to 360p.
Reading the list of the other fallers was like taking a stroll down the high street. Sears, the Miss Selfridge chain, was down 7.5 per cent to 196.5p. Next slumped 31p to 444p, Marks & Spencer fell 15.25p to 400p. GUS, the owner of Argos, did even worse as dealers panicked over today's results. The shares crumbled 8.3 per cent to a 52-week low of 574p. Allied Carpets rolled out its own disastrous trading update and slid 2p to 47.5p.
Boots fell 34p to 940p. Market insiders whisper that the chemist is preparing a very downbeat trading update. Sainsbury, down 19p to 478p, added a bit of food flavour to the retailers' debacle.
Dixons' star shone alone in the sector's night. The electrical chain touched an all-time high of 758p, up 18p after an investors' presentation at Goldman Sachs. The bank's clients were impressed with Dixons' burgeoning Internet service.
Marley was the cheer of the mid cap. The building materials group, rose 16.5 per cent to 123p after finding a Belgian white knight to save it from the attack by its smaller rival John Mansfield. Etex, a privately owned company, is bidding 125p a share in cash, well above Mansfield's 97.4p bid.
Rugby Group, another suffering materials-maker, built a rally on its recent underperformance and ended 5.5 p higher at 87p. Tarmac added to the construction rally with a 3.5p rise to 112.5p. A deal with rival Aggregate Industries is said to be close.
Sentry Farming was the market's worst performer The agriculture group dropped 32 per cent to 43.5p after warning of a substantial trading loss for the year. The BSE scare, sterling strength and a slump in crop values did the damage.
Hornby, the maker of toy railways, hit the buffers, as it cautioned that tough trading would derail profits. The shares shed 37.5p to 147.5p.
Cortecs, the biotech group, rebounded 3.5p to 15p following Tuesday's product-delay warning.
SEAQ VOLUME: 1.12 billion
SEAQ TRADES: 68,252
GILT INDEX: 114.24 -0.03
ASTEC, the electronic equipment maker set to fall to US rival Emerson, remained unmoved at 84.5p as two directors sold their stakes. Howard Lance, chief executive, sold 50,000 shares at the 85p offer price for pounds 42,500. Neal Stewart, technical director, dumped 1.25 million shares for over pounds 1m. Mr Stewart, one of Astec's founders, also cashed in options, netting over pounds 700,000. Emerson yesterday increased its Astec holding to 87.3 per cent.
BUYERS WERE deaf to Hidden Hearing's plight yesterday. The recently floated retailer of hearing aids fell over 10 per cent to 117.5p, after warning of tough conditions in the UK and Ireland. The group, which owns 43 branches in the UK, revealed that increased marketing expenses to keep sales afloat will hit margins at the year-end. The group remains on the lookout for earnings-boosting acquisitions.