Stocks suffered yesterday in Asia and Europe and later in New York in reaction to the news from Intel, released after the close of trading on Wall Street on Wednesday.
In London the FTSE-100 index ended 38 points lower at 5,695.6. There was caution but no panic, as dealers noted that share prices had hit all- time highs at the beginning of the week. The FTSE 100 reached 5,846.9 on Monday.
High technology stocks suffered across Europe as a result of the Intel warning, with shares in companies such as France's SGS-Thomson Microelectronics and Germany's Siemens falling sharply. Earlier, the fear of weakness on Wall Street had hit Asia, and especially Hong Kong. Intel was itself the main victim of the sell-off yesterday. In early trading its stock was down 16 per cent on the Nasdaq market.
The damage was confirmation of Intel's status as the ultimate bell-wether stock for the technology sector, with its processors packaged in 85 per cent of all PCs in existence.
Intel had earlier said it expected first quarter results to be flat after fourth quarter revenues of $6.5bn (pounds 3.9bn). It is now warning that it may come in about 10 per cent short of that number, which would mean revenues at their lowest since the third quarter of 1986.
Blame for the fall-off lay primarily with unexpectedly sluggish demand for chips from the PC industry. Analysts said that was in part explained by an inventory hang-over from Christmas. Other factors might include the continuing economic crisis in Asia, where many US technology companies have large exposure.
Some analysts saw more fundamental problems for Intel, notably its slow response to growth in demand for PCs costing $1,000 or less where it has faced tough competition from two other chip makers, Advanced Micro Devices and Cyrix.
In April, however, it is due to come out with its Celerion chip, specifically aimed at the lower end of the market. PC makers might be waiting for the arrival of the new chip.
Among other companies that saw damage to their stocks in New York yesterday were Hewlett-Packard, Dell Computer, IBM and Microsoft. None of those suffered dramatic losses, however.
The Dow Jones industrial average suffered a second day of decline after a month of almost unbroken gains. But while the index was down nearly 70 points at the lunch-hour, it also seemed to be resisting the downward pressure better than some had expected.
Even so, there was a ripple effect on other stock markets.
A massive sell-off of shares in Hong Kong caused a 547 point, or almost 5 per cent, dive in the blue-chip Hang Seng Index.
The decline, bigger than in most other Asian markets, was triggered by a spell of profit- taking following the market's relatively strong performance last month, and in anticipation of further weakness on Wall Street.
The flow of bad news in Hong Kong is far from over. On Wednesday the government revealed that there had been a massive outflow of Hongkong dollar deposits.
Some HK$62bn (pounds 4.8bn) or almost 4 per cent of all Hongkong dollar deposits, was withdrawn in October, another HK$17bn came out the following month and HK$34bn in January.
The potential nightmare is that massive withdrawals of Hongkong dollar deposits will undermine the currency board system, which requires full foreign currency backing for every Hongkong dollar issued.
Continuing fears of regional contagion also took their toll. There was concern over reports that the International Monetary Fund (IMF) might delay payment of the next tranche of the Indonesian bail-out. In Korea political uncertainty contributed to a 6.5 per cent fall in share prices.
Meanwhile, Eisuke Sakakibara, Japan's vice-finance minister, was on a South East Asian tour where he discussed tying the region's currencies to the Japanese yen instead of the US dollar. This idea was rejected in the early 1990s but is coming back into favour as Asian countries search for an alternative to a link with the ever-strengthening US dollar.
Although the yen itself is under pressure, it is the only regional currency big enough to provide a serious alternative to the US dollar.
However, the weak state of the Japanese financial system will probably make the idea of a yen bloc a non-starter for the time being.