Europe's technology stocks were under pressure after Compaq of the US cut earnings forecasts and the market anticipated further bad news from Yahoo and Motorola.
The collapse of technology valuations was typified by Nokia, a stock that investors had previously hoped would survive where others foundered. Its shares yesterday fell 5.2 per cent to #20.50, their lowest since September 1999, well before the tech bubble in Europe.
Nokia's earnings per share estimates were downgraded by Morgan Stanley. They cut by just 1 per cent to #0.70 for this year but by 15 per cent to #0.75 for next year.
Morgan Stanley said one main driver for the cuts was that it was now expecting to see only 370 million mobile phones sold globally this year rather than 380 million, and 440 million next year rather than 477 million. Another was that it expects lower margins on network infrastructure business.
Peer group Alcatel fell 4.8 per cent to #17.92, as it announced it would cut another 2,500 jobs in the US, or 16 per cent of its workforce there. Alcatel, which recently ended talks with Lucent, is now at its lowest since October 1998, when there was a previous global markets downturn.
Other French technology-related stocks that took a hit were Schneider Electric, down 5.4 per cent to #59 and Cap Gemini, down 4.8 per cent to #74.75. Dutch technology heavyweight Philips was down 3 per cent at #28.73.
Another indicator of the poor sentiment was a 27 per cent fall in the share price of pan-European cable company UPC to a new low of #1.78. Schroder Salomon Smith Barney cut its recommendation from "buy" to "neutral".
Deutsche Bank downgraded ABN Amro, which dropped 4.9 per cent to #20.32, and Credit Lyonnais, 1 per cent firmer at #44.90, on concerns over credit quality, a downturn in investment banking, decelerating loan volumes in retail banking and on recent sector outperformance.
Merrill Lynch, meanwhile, cut earnings estimates for Deutsche Bank, CS Group and UBS, though it left their ratings unchanged. The US investment bank attributed the reductions to deteriorating market conditions. Commerzbank securities downgraded the European banking sector, saying that with continued economic uncertainty in Europe and the US it saw increased risk to bank earnings.
Societe Generale dipped 2.5 per cent to #63.20 as the group confirmed that a block trade of 14.1 million shares was linked to its acquisition of a majority stake in the Los Angeles-based asset manager, TCW.
Hopes that falling demand could be bottoming out in the chemicals industry brought an upgrade for the sector from Merrill Lynch. "While fundamentals remain weak and further profit warnings are a possibility, share prices are showing resilience and we believe, in the absence of global meltdown, they are discounting further bad news," the US investment bank said.
ABB, the world's largest electrical engineering group, dropped 5.6 per cent to #23.40 as news of a freeze on recruitment stoked fears that the company would cut its 2001 earnings, in line with its US rival Emerson.
