European shares hit their lowest levels since January 2000 yesterday as stronger-than-expected US data compounded steep falls for technology stocks.
The DJ Euro STOXX 50 fell 2.06 per cent and the FTSE Eurotop 300 1.7 per cent, having troughed at 4,500.47 and 1,476.22 respectively with falls of two per cent. The tech-heavy Nasdaq composite index fell 4.5 per cent and the Dow Jones 0.8 per cent by the time most European bourses shut.
Techs led the sectoral decline and hit 15-month lows after a string of warnings from flagship high-tech companies.
Nortel was a notable offender and sent European techs down as much as 6.7 per cent.
The world's number one supplier of fibre-optic telecoms equipment slashed its 2001 revenue forecasts, dashing fragile hopes for a second-half recovery in the embattled industry. Nortel warned it would post a first-quarter loss and would increase job cutbacks.
One European fund manager said the group's reputation was at stake over the latest bodyblow to the new economy.
"Clearly this has come as a surprise and will definitely have an effect on their credibility on how they deal with the market," he said.
Nortel stock fell 34 per cent.
Alcatel was particularly badly hit, dropping nearly nine per cent despite saying that unless there were a further deterioration in the market it was keeping its 2001 forecast for telecoms growth of 20-25 per cent. Its Alcatel Optronics division lost 3.5 per cent.
"Alcatel correlates closely with Nortel, but we see it as being slightly more insulated as network buildout in Europe has lagged that of the US, and we are more exposed to wireline business rather than wireless, and wireless is where Nortel has become more unstuck," said Charles Prideaux, managing director, global equity portfolio at Merrill Lynch Investment Managers.
But nothing was fully insulated from the general gloom. Even the defensives took a tumble, with food and beverages falling nearly one per cent.
Nortel's news - accompanied by warnings from Dell and Hewlett Packard - came as a chill blast as investors had begun to hope the US economy would bounce back.
Comments from Fed chairman Alan Greenspan earlier in the week on a US recovery late in the year encouraged that belief.
