Telco troubles menace markets
Geoff Elliott
09 April 2001
MOUNTING concerns about telecommunications and technology companies look like sending Wall Street into a spin again today.
Traders in New York reacted negatively on Friday after mobile phone giant Motorola was forced to deny rumours it faced liquidity problems and would not be able to meet debt obligations. Its shares were marked down by 23 per cent to $US11.50, its lowest level in eight years.
The news was also bleak at the weekend as telecommunication companies including Sycamore Networks, Agilent Technologies, Tellabs and RadioShack issued profit warnings.
Shares in telco giant Lucent Technologies continued to fall, dropping a further 12 per cent.
This will set the scene for a softer Australian share market today, though analysts predicted better news for the Australian dollar.
They said that while air continued to escape from the US stock market bubble, the long-anticipated rebound for the Australian dollar could be near as investors dump US assets.
The dollar show renewed strength at the weekend, trading above US49c despite hitting a record low last week of US47.75c. Traders are now watching for signs of strength in the chief trading partner currencies of the euro and the Japanese yen, which could help underpin the Australian dollar.
But the focus was on the US, where investors were rocked, heading into the weekend amid another round of profit warnings from telecommunication companies as well as news that the Californian power crisis has meant bankruptcy proceedings have started at Pacific Gas & Electric, California's largest utility, which owes more than $18 billion.
Weaker employment data in the US also shattered already brittle nerves and last week's rally for the Dow Jones index and the Nasdaq was slammed into reverse.
The Dow Jones industrials index fell 126.96 points to 9791.09 on Friday, one day after making its second-largest daily point gain.
The Nasdaq composite index slipped 64.64 to 1720.36, and the Standard & Poor's 500 fell 23.01 to 1128.43.
"We continue to have negative news out of the States and that is keeping share markets around the world on tenterhooks," Commonwealth Securities chief economist Craig James said.
But Mr James said the US woes could have a silver lining in Australia because share prices here have not been following the US experience of stellar gains one day and jaw-dropping falls the next.
"I think the market will perform quite well despite the negative news out of the US," he said.
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