Recovery fear sends shares diving

Markets in turmoil: Worries over faltering US profits push prices down on Wall Street and in London

Share prices plunged on both sides of the Atlantic yesterday to some of their worst levels in months. In London an estimated pounds 13bn was wiped off the value of UK companies at one stage as the stock market slumped almost 70 points before rallying.

On Wall Street, a wave of selling pushed the Dow Jones index down more than 60 points as Americans worried about falling profits from a stumbling recovery. UK investors were reacting to a growing sense of crisis within the Conservative Party - and the Wall Street fall.

The Footsie was off 67.8 points by mid-afternoon. Although the index recovered, it still closed 50.2 points down at 3460.1.

Share prices on Wall Street fell sharply yesterday morning in heavy trading, as what began as investor jitters over the prospects for technology stocks widened into an across-the-board sell-off. For the second day running New York Stock Exchange limits on program trading came into effect, triggered by a near 65-point drop in the Dow Jones Industrial Average shortly after the opening bell.

By lunchtime the market had recovered some ground, but the Dow was still down by 37.21 points at 4689.01, and the Nasdaq composite index, which was 20 points down in early trading, stood at 970.90 for a loss of 13.84 points.

Market strategists played down the significance of yesterday's movement. "It's this absurd situation, with the UK marked down ahead of an expected plunge on Wall Street. Then after the close the Street bounces back" one said. But he warned that any recovery later in the week would depend on how the markets reacted to key speeches from the Chancellor and Prime Minister in Blackpool.

Another strategist described the fall as an over-reaction, blaming a dearth of the takeover news that has buoyed the market over the summer. But he said bids and a wave of consolidation in financial services had distracted from poor market fundamentals - recent weakness in the gilt market following the uncovered auction, poorer than expected economic figures and a worsening outlook for corporate earnings.

The consensus from BZW's sector analysts now points to earnings growth this year of 11 per cent, compared with the 15 per cent expected recently. Steve Wright, the firm's UK equity analyst, believed that figure could retreat even further to maybe 8 per cent.

Analysts said markets might normally be expected to bounce back today but forecast continued uncertainty ahead of key speeches tomorrow and Friday from Kenneth Clarke and John Major, as well as inflation figures expected to edge higher.

The recent weakness of the New York market again focused on bearish sentiment in the highly rated technology sector. Poor results from Motorola, the computer chip manufacturer, and a gloomy report from the Semiconductor Industry Association sparked fears of a sell-off in the sector that has largely driven the rise in Wall Street this year.

Many analysts view the correction in the technology sector as overdue, and also point out that the broader market enjoyed its fastest run-up since 1987 during the first three quarters of 1995. They have been expressing caution since early summer, but have been drowned out by the hype over the launch of Microsoft's Windows 95 operating system, and the market frenzy over offerings such asNetscape. Its share price more than doubled on its first day of trading in August. Hi-tech stocks did not fare so well in September, but the past few days have seen the first signs of panic selling by small investors, who have so far appeared blind to the risks in the market.

Investors in the US are also becoming increasingly exercised about third- quarter earnings figures due in November, which analysts believe will disappoint compared with the impressive first and second quarter numbers.

This week's sell-off was triggered in part by Friday's announcement from Novell that its fourth-quarter earnings would fall well short of analysts' expectations, as a result of weak sales in its applications software products, which include WordPerfect. Novell said weak third quarter sales were going to get worse in the current quarter. This announcement was made after close of trading on Friday, but was picked up on Monday morning as an excuse to start offloading technology stocks.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Phillips Idowu, Stella McCartney and Jessica Ennis
fashionMcCartney to continue designing Team GB Olympics kit until 2016
Sport
Shinji Kagawa and Reece James celebrate after the latter scores in Manchester United's 7-0 victory over LA Galaxy
football
Voices
voicesGood for Lana Del Rey for helping kill that myth, writes Grace Dent
Sport
Farah returns to the track with something to prove
Commonwealth games
Life and Style
fashion Designs are part of feminist art project by a British student
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform
Climate change threatens to make the antarctic fur seal extinct

Take a good look while you can

How climate change could wipe out this seal
Should emergency hospital weddings be made easier for the terminally ill?

Farewell, my lovely

Should emergency hospital weddings be made easier?
Man Booker Prize 2014 longlist: Crowdfunded novel nominated for first time

Crowdfunded novel nominated for Booker Prize

Paul Kingsnorth's 'The Wake' is in contention for the prestigious award
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned

Vladimir Putin employs a full-time food taster

John Walsh salutes those brave souls who have, throughout history, put their knives on the line
Tour de France effect brings Hollywood blockbusters to Yorkshire

Tour de France effect brings Hollywood blockbusters to Yorkshire

A $25m thriller starring Sam Worthington to be made in God's Own Country
Will The Minerva Project - the first 'elite' American university to be launched in a century - change the face of higher learning?

Will The Minerva Project change the face of higher learning?

The university has no lecture halls, no debating societies, no sports teams and no fraternities. Instead, the 33 students who have made the cut at Minerva, will travel the world and change the face of higher learning
The 10 best pedicure products

Feet treat: 10 best pedicure products

Bags packed and all prepped for holidays, but feet in a state? Get them flip-flop-ready with our pick of the items for a DIY treatment
Commonwealth Games 2014: Great Scots! Planes and pipers welcome in Glasgow's Games

Commonwealth Games 2014

Great Scots! Planes and pipers welcome in Glasgow's Games
Jack Pitt-Brooke: Manchester City and Patrick Vieira make the right stand on racism

Jack Pitt-Brooke

Manchester City and Patrick Vieira make the right stand on racism
How Terry Newton tragedy made iron men seek help to tackle their psychological demons

How Newton tragedy made iron men seek help to tackle their psychological demons

Over a hundred rugby league players have contacted clinic to deal with mental challenges of game