FTSE 100 closes at three year lows as TMTs mauled
(Writes through)
By Keiron Henderson
LONDON, Sept 6 (Reuters) - British blue chip shares
spiralled to their lowest close in nearly three years on
Thursday as belief in the ravaged technology, media and telecoms
sectors' ability to grow profits was given yet another beating.
Investors took weak UK economic data as a trigger to dump
unloved TMTs, with telecoms equipment maker Marconi <MONI.L>
hounded another 23.7 percent lower to 28-3/4p as worries about
its debt levels bit deeper. Mobile giant Vodafone <VOD.L>
dropped 3.7 percent on fresh pessimism about 3G services.
The benchmark FTSE 100 index closed 111.7 points or 2.1
percent down at 5,204.3, putting in its biggest single trading
day fall since a 106-point slide in June and touching its lowest
close since October 1998 after an intraday low of 5,189.8.
"We haven't got enough guidance from companies to say that
they (TMT shares) look that cheap. We're not at bargain-basement
levels yet and the buyers are waiting for prices to come lower,"
said David Manning, head of UK equities at money managers F&C.
News UK manufacturing output fell by a worse-than-expected
0.9 percent in July to be 3.0 percent lower on the year was
taken as a sign that the British economy was beginning to catch
the cold afflicting the U.S. economy.
"There seems to be another complete blowout on the whole TMT
sector," said Steve Russell, UK equity strategist at HSBC.
"It must be reflecting lack of confidence and worries that
the impact of the U.S. slowdown is going to continue to get
worse and presumably fears that it will spread further into the
UK, rather than the UK being able to ride out the downturn."
A Bank of England decision to leave interest rates unchanged
sparked a short-lived flutter lower in the FTSE 100 but market
watchers said the impact was swallowed up by the overall mood of
deep gloom.
"There hasn't been anything in the way of British company
news. I think it's excessive and continuing pessimism about the
whole outlook," said Russell.
DOWN WITH TMTS
The UK manufacturing data was seized upon by investors
anxious to get out of the TMT sector, mauling those shares seen
as likely to be dropped from the FTSE 100 at a quarterly review
next week.
"I think active fund managers have had enough, saying they
don't want TMTs anymore at whatever price," said a trader,
pointing out that index tracker funds would want to wash their
hands of the shares ahead of demotion from the FTSE 100.
Energis <EGS.L>, Telewest <TWT.L> and telecoms-testing
equipment firm Spirent <SPT.L> were down 12-16 percent, while
Marconi touched a low of 28-1/4p, a far cry from its September
2000 heyday of 1,276p. All are candidates for the FTSE drop.
Marconi shares have halved from near 60p on Tuesday in the
wake of a profit warning and a top management clearout, but came
under pressure again on Thursday after a credit rating agency
cut the firm to junk bond status and questioned whether it could
reach its debt-reduction targets.
Word from an industry source that Vodafone had cut the speed
at which it plans to transmit data over its next-generation
mobile phone networks knocked its shares, which closed down
5-1/2p at 137-1/2p.
Nervousness about the financial sector's exposure to sick
equity markets hauled fund manager Amvescap <AVZ.L> 7.2 percent
down to 913p and knocked Prudential <PRU.L> down 5.3 percent.
Banks came under fresh pressure, caught up in the general
selling and losing some of their recent allure as a
consolidation play. Barclays <BARC.L> was down 4.7 percent to
1,990p while Royal Bank of Scotland <RBOS.L> lost two percent.
Traders said there were some jitters that the banks could
get caught in the backwash if Marconi runs into trouble with its
debt pile.
UP WITH DEFENSIVES
Defensive and cyclical shares mopped up what little buying
interest emerged, with gas and home services group Centrica
<CNA.L> rising 3.1 percent to 227p after releasing first-half
results which beat forecasts.
Other defensive gainers, shares expected to maintain their
performance in tough economic conditions, included supermarket
group Safeway <SFW.L> up 1.2 percent at 342p and Imperial
Tobacco <IMT.L> 0.6 percent higher.
Away from the blue chips, mid-cap food supplier Northern
Foods <NFDS.L> gained 3.3 percent to 156p, while building
materials firm Marshalls Plc <MSLH.L> climbed 2.6 percent to
240p after issuing a bullish outlook.
Bioglan Pharma <BGP.L> was the biggest mid-cap loser, down
17.5 percent as investors got nervous waiting for the expected
announcement of a big skincare deal. The shares have fallen
from 317p since late August amid speculation that the deal may
be running into trouble.
Advertising display supplier Photobition <PHB.L> fell 12
percent to 14-1/2p after a report that a proposed management
buyout had run into trouble. A company spokesman said talks were
ongoing. The shares dropped 15 percent on Wednesday and have
fallen from a 565p peak in March 2000.
The Midcap 250 index closed down 93.7 points or 1.6 percent
at 5,946.1, while the techMARK index closed down 48.3 points or
3.4 percent at 1,390.9, up from a new life low of 1,387.6.
INTEL JITTERS
Traders said the market had bedded down nervously ahead of a
trading update from U.S. chip giant Intel <INTC.O>, expected
after the New York close, as well as U.S. jobs data due Friday.
News late in the session that U.S. wireless technology
company Motorola <MOT.N> cut its sales outlook for the third
quarter to flat from a previous five percent rise on the second
quarter did little to rock an already punchdrunk market.
F&C's Manning found some crumbs of comfort as the FTSE 100
diced with the 5,200 level, 100 points below its recent
5,300-5,600 trading range.
"It's a bit bloody. It feels as though it wants to be in the
last flurries of despair and despondency, but it's better than
death by a thousand cuts," he said.
"I think people might start nibbling close to 5,000. That
would be quite tempting."
((Keiron Henderson, London Newsroom +44 20 7542 6687, fax
+44 20 7542 2120, uk.equities.news@reuters.com))
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