More depressing corporate earnings news from both sides of the Atlantic set the seal on what was a bad week for London's equity market. Posting its fourth decline in five sessions, the FTSE 100, London's benchmark index, dropped back below 5,700 for the first time since May 14 when the index tumbled 130 points during the postmarket auction before rallying strongly late in the session, along with Wall Street.
The Dow Jones Industrial Average had taken an 181 points pasting on Thursday while the Nasdaq fell 77 points. The Dow dropped another 123 points shortly after the opening yesterday, before rallying strongly to post a 10 points gain as London closed.
Some observers took the view that the latest dismal US output and capacity utilisation figures, along with a retreating Wall Street, might induce the US Federal Reserve's open market committee, which meets on June 26th and 27th, to cut US interest rates again.
At the close the Footsie was down 29.5 at 5,723, having fallen 94.8 to 5,657.7 at its worst of the session. Over the week the index fell 227.6, or 3.8 per cent. Footsie was dragged down yesterday by a general sell-off in the TMT sectors, with more than a little help from the banks, led down by Royal Bank of Scotland, which alerted the market to evidence of rising bad debts.
The market's retreat was briefly arrested by the US consumer price index data for May which came in about the consensus forecast, up 0.4 per cent. But the market then resumed its downward path as US industrial production and capacity utilisation data showed another downwards lurch during the month. Sentiment in London remained extremely fragile, buffeted all week by a succession of worrying corporate earnings news and a sequence of rather alarming domestic economic data, which pointed to the prospect of higher interest rates.
The bad news started overnight in the US with profits warnings from HJ Heinz and JDS Uniphase and fears that General Electric might withdraw its offer for Honeywell. And matters got progressively worse as the day wore on with news of a profits warning from Philips of the Netherlands and a startling earnings warning from Nortel Networks which said it expects a colossal $19.2 billion (€22.3 billion) loss for the second quarter, after special charges.
