Technology and telecoms sectors suffered steep losses yesterday as the Nasdaq continued to fall after the US Fed's recession warnings. Many companies saw double-digit percentage falls. To add to the gloom, Merrill Lynch cut its rating on three high profile US names IBM, Hewlett Packard and Cisco which rebounded across European stocks.
James Montier at Old Mutual Securities said the fact that the Fed bypassed the neutral stance on inflation to move straight to recession alert had spooked the markets. He believed technology stocks "still have a bit of downside", although he warned that thin volumes mean that share prices can be "very whippy".
Paris, which is a relatively tech-sensitive market, was pulled down to its lowest since January 31st. Stockholm was back to the levels of more than a year ago for the same reason.
One notable landmark was reached yesterday by the Internet company Terra Lycos, whose shares for the first time fell below the 1999 launch price of €11.80. Terra became a flagship of Europe's Internet sector when it floated just over a year ago, reaching a peak in March about 10 times its starting price. Many share prices in the sector were encouraged by its soaring example.
Terra, in addition to the downturn on the Nasdaq, is being hurt by uncertainty about its future management line up. The shares closed down 14.8 per cent at €11.50, their seventh successive fall.
The telecoms stocks were down 5-10 per cent. Deutsche Telekom got off lightly with a 4.3 per cent fall to €35.28, but still hit a low for the year. France Telecom lost 4.8 per cent, Telefonica 5.9 per cent, KPN 9.7 per cent and Sonera 10.6 per cent. France Telecom and Bouygues, which fell 6.5 per cent, were under extra pressure after a warning by Jean-Claude Trichet, the French bank governor, on telecoms debt.
Among other big losers yesterday was the chipmaker Alcatel, which fell more than 12 per cent to €59.50. The pan-European aerospace company EADS rose 4.1 per cent to €22.87 as analysts started coverage of the stock following the launch on Tuesday of the Airbus A380 superjumbo. Goldman Sachs announced a target price of €28 and added it to its recommended list after the company announced increased financial targets.
