Shares hit by Tokyo chaos

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The Independent Online

A wave of selling hit the London stock market today after a chaotic session in Japan compounded gloom over earnings updates from the United States.

Investors saw the City's strong start to the year come to a halt as the FTSE 100 Index slipped by more than 50 points, mirroring falls elsewhere in Europe.

Confidence was hit by disappointment over fourth quarter statements from Intel and Yahoo, while a second successive session of heavy losses for the Nikkei added to the downbeat mood.

The decline in Tokyo - 6% over two days - was sparked by a fraud probe at internet firm Livedoor, prompting a heavy fall in technology stocks. The Tokyo stock exchange closed 20 minutes early because of the surge in transactions.

Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, saidthe earnings disappointment in New York lay behind most of London's weakness.

He said: "The situation in Japan is not going to help sentiment, but people are nervous at the start of the corporate earnings season in the US.

"It's a tough day for the London market but it should not threaten the story in the UK in terms of the FTSE 100 moving forward."

Results from Yahoo failed to meet market expectations after the web company made profits of £140 million in its fourth quarter. Other tech companies, including Google, were dragged lower by the weaker-than-forecast performance.

But the main drama came in the early hours of the morning as the Nikkei 225 index dropped 464.77 points, its biggest drop since May 2004.

The decline extended losses from Tuesday, when the Nikkei fell 2.8% amid allegations against Livedoor involving the violation of securities laws by giving false information.

Livedoor, an internet start-up, is headed by 33-year-old Takafumi Horie, who has risen to celebrity status for his frequent TV appearances and unsuccessful attempts to buy a media conglomerate and a baseball team. Horie denies any wrongdoing and has pledged to co-operate with authorities.

Technology and electronics firms impacted by the wider sell-off today included Canon, Toshiba and Sony.

The Tokyo Stock Exchange warned in the early afternoon it would stop trading if the system limit of four million transactions was reached.

Tom Hougaard, analyst at City Index, said the suspension was hugely embarrassing.

He said: "In the short-term it reduces the confidence that foreign investors have in the Japanese market. Foreigners are attracted to the region but if you have a glitch where there is no trading people are going to be somewhat reluctant to go back to the market."