London hits lowest point since Russian crisis

The London stock market tumbled more than 100 points yesterday to hit its lowest point since the depths of the Russian crisis in 1998.

The London stock market tumbled more than 100 points yesterday to hit its lowest point since the depths of the Russian crisis in 1998.

Another steep fall on the Tokyo stock market and a fresh wave of profits warnings deepened concern that the world was sliding into recession. But there was a nervous calm on Wall Street as the Dow Jones index slipped only slightly in early trading, and bargain hunters helped to lift the Nasdaq into positive territory.

In London the FTSE 100 index closed down 105.8 points at 5720.7, its lowest since December 1998. The carnage was most severe among hi-tech stocks following profit warnings from Cable & Wireless and Motorola. The techMARK 100 index of technology stocks lost 2.2 per cent to reach its lowest close for 17 months.

The day's mood was set in the Far East where the Nikkei-225 index of leading Japanese shares dropped 351 points following Monday's 457-point drop. This wiped 6.6 per cent off the market in two days and took the market value to a 16-year low. Meanwhile, surveys indicating that Australia was now in recession sent Sydney's main stock index falling 1.7 per cent.

But in New York, there was no sign of a resumption of Monday's carnage that saw the Dow shed 400 points, the S&P 500 enter a bear market and the Nasdaq fall 6 per cent. However, the markets failed to stage a credible rebound as concern deepened about corporate earnings and the US economic slowdown in general.

The atmosphere was not improved by a government report showing a 0.2 per cent decline in US retail sales in February, the first drop since November 2000. This helped to spur expectations that the Federal Reserve will cut interest rates for a third time this year at a meeting next Tuesday.

The Nasdaq was pushed higher in morning trading as investors turned to companies such as Oracle and Sun Microsystems. Greater damage might have been seen in the Dow also but for bargain-buying of IBM and Hewlett-Packard.

"We've gotten down far enough that there is going to be some bargain-hunting," said Richard Dickson of Scott and Stringfellow. "But I don't think we've put the low on the market yet. We're clearly still correcting the excesses in some of the tech stocks."

There was optimism in continental Europe where new figures showed signs of robust growth in Germany, the area's largest economy. The country's exports jumped 23.6 per cent in January compared with a year ago, beating analyst expectations. The German Chancellor, Gerhard Schröder, said he saw "no reason for the exaggerated pessimism". However, this did little to reassure the markets. The blue-chip DAX index lost almost 2 per cent while the tech-rich Nemax shed over 3 per cent.