Euro intervention helps equity markets recover from Intel shock

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Global stock markets went on a roller-coaster ride yesterday after central bank intervention to prop up the euro helped restore investor confidence in the wake of the shock profits warning from Intel, the world's biggest chip manufacturer.

Global stock markets went on a roller-coaster ride yesterday after central bank intervention to prop up the euro helped restore investor confidence in the wake of the shock profits warning from Intel, the world's biggest chip manufacturer.

Following sharp overnight falls in Far East markets, with Japan's Nikkei Index closing almost 500 points or 3 per cent lower, the FTSE 100 index opened more than 120 points down, while the US high technology Nasdaq index began more than 200 points off.

By the end of the day, however, the FTSE 100 had recovered all its lost ground to close 6.7 points higher at 6,205.9 while the Nasdaq and the Dow Jones indexes had managed to halve their losses in late afternoon trading.

London's rally was helped by a surge in Old Economy stocks such as GKN and Invensys following the announcement of co-ordinated central bank intervention to shore up the ailing European currency. The steelmaker Corus, one of the stocks most exposed to exchange rates, also shot up after its chairman, Sir Brian Moffat, had earlier warned the company's annual meeting that the weakness of the euro remained a "major concern". But many technology stocks ended the day sharply down on fears that Intel's warning of lower third-quarter revenues presaged a downturn in the European PC market.

The UK's TechMARK high-technology index closed 51.21 points lower at 3,646 points having been more than 100 points down at one stage.

Arm, the UK chip designer, was one of the biggest early casualties, falling almost 7 per cent before recovering ground late in the day to close just 1p lower at 700p. The software company Misys ended the day 5 per cent down - the biggest faller in the FTSE 100 - while Freeserve lost 3.4 per cent of its value after having been more than 6 per cent lower at one stage.

The co-ordinated intervention on the foreign exchange markets by the European Central Bank and all the central banks of the G7 also helped restore confidence on continental bourses. The Dow Jones Euro Stoxx Index, which tracks the shares of companies in the eurozone, ended the day just 1.05 points lower at 410.18. In Germany the chip manufacturer Infineon, formerly part of Siemens, lost 5.3 per cent of its value and STMicroelectronics, Europe's biggest chipmaker, lost 2,5 per cent. However, Frankfurt's Xetra Dax Index closed 0.5 per cent higher while in Paris the CAC Index gained 0.1 per cent.

The FTSE's last-gasp return to positive territory was only the second time in the past two weeks that it has ended a session higher. The index has now lost nearly 9 per cent of its value since the start of the month, driven lower by a mixture of interest rate fears and rising oil prices.

Jonathan Stubbs, UK equities strategist at Schroder Salomon Smith Barney, said: "We've come back through US weakness. That tells you there is interest out there and that investors do see value in the market, especially at the levels we saw this morning. That isn't to say that the market won't fall on Monday or Tuesday but around those levels there are good bargains to be picked up and the market does look increasingly cheap around these levels."

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