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The Market
Blue chips finished a volatile Friday session and week sharply lower as investors in the UK reacted to sharp falls on Wall Street following the release of stronger-than-expected US March CPI data, which has re-ignited fears of a further tightening in US interest rates, dealers said. The technology, media and telecoms stocks (TMTs) bore the brunt of the decline as Nasdaq fell back further, with some suggesting that a test of the 3,000 level could be on the cards in a matter of days.
The FTSE 100 index closed the session 178.9 lower at 6,178.1, having broken through psychological support at both 6,300 and 6,200. But the index did manage to remain just above its 6,149.8 low, registered shortly after Wall Street's open.
At the London Friday close, Nasdaq registered losses of 204 points to 3,472.67, below the key 3,500 level, while the DJIA posted fall of 274.03 to 10,6548.28. The broader UK indices finished in negative territory, hit hard by the sell-off on Nasdaq, with techMARK posting declines of 196.3 points to close at 3,675.96. Volume was a hefty 1.473 billion shares in 108,343 transactions, swollen by some large trades in Vodafone Airtouch, Rentokil Initial, BP Amoco, Shell and Diageo.
The skids were under the London market right from the off as traders reacted to the 202 point slide in the Dow overnight, and a further downward correction in Nasdaq - which reversed earlier gains to rest almost 100 points lower following a late sell-off.
Falls in "new economy" stocks led the wider market lower in early deals, with "old economy" issues still enjoying some support despite the hefty mark-down on the Dow overnight.
The real fear for the market now is that New York is in a bear market and that the correction seen on Nasdaq in recent days may be just the beginning of a more prolonged and dramatic fall.
Robert Fleming chartist Nick Glydon was among those identifying the next Nasdaq support point at 3,000. Other market analysts predict a bottom as low as 2,000, with both Merrill Lynch and Morgan Stanley's analysts warning that room remains for another correction in both London and New York. Equity analysts predicted that European technology shares would under-perform the wider equity market by a further average of 15 per cent, having already lost 22 per cent since their March peak.
However, they consider this to be a correction and not a bear market. As a result, many of the big institutions - rather than buying stock on the dips as has characterised recent shakeouts - are remaining out of the market until they feel global markets have finished their correction phase and entered a more stable period.
But any buying of high tech issues even at these new lower levels may prove to be much more selective than the trend seen in recent months, as investors search for quality among the dot.com stocks.
The weak market tone persisted for most of the morning session as investors on both sides of the Atlantic fretted about key US March CPI data, especially after recent comments on the inflation outlook in the US from the IMF. As it was, the inflation data, rather than providing some comfort to markets, actually reignited fears of an early tightening in US interest rates.
The data showed the pace of inflation accelerating in March as the CPI rose 0.7 per cent, led by a sharp increase in the cost of energy. The core rate of the CPI, which excludes volatile food and energy costs, rose 0.4 per cent. This rise was the biggest in 11 months and much larger than expected, with the consensus forecast of Wall Street economists looking for CPI to have risen 0.4 per cent month-on-month, slower than the 0.5 per cent gain in February.
But perhaps the most alarming part of the data was that price gains were so widespread - stretching far beyond what could be explained by the continued strength of crude oil prices. The news prompted a knee-jerk slide on Wall Street when it opened, with Nasdaq - as usual - bearing the brunt of the decline. But, even with New York tumbling, there was no sense of panic selling in the UK market.
The sell-off in TMTs dominated sentiment throughout the day, with investors baling out of the sectors as Nasdaq's radical downward correction continued. Baltimore topped the list of fallers, 1,727 pence at 5,344 pence, Psion shed 768 pence to 2,630 pence, Logica slid 150 pence to 1,616 pence, EMAP down 115 pence at 1,001 pence and Freeserve lost 26-1/2 pence to 373 pence.
FTSE 100 index heavyweight Vodafone Airtouch crumbled 23-1/2 pence in active trading to 300-1/2 pence, with some watchers fretting about the size of the bids being made in the ongoing 3G licence auction. BAe Systems was also on offer, down 1-1/2 pence at 361 pence, after the collapse of the Finmeccanica deal. Boots shed a further 7 pence to 534-1/4 pence, still reeling from CSFB's decision to move the stock to an outright "sell" amid concerns about increasing competition on its Boots The Chemists chain.
The switch into "old economy" stocks gathered pace as Nasdaq collapsed, but - even here- buyers were few and far between. Reckitt Benckiser was one of the few gainers, up 38 pence at 660-3/4 pence, ahead of upcoming results, while Railtrack firmed 23-1/2 pence to 845 pence after the latest news from the regulator and as SG Securities and ABN Amro highlighted the stock's attractions.
Energis resisted the downward trend, gaining 82 pence to 2,715 pence as stakeholder National Grid signalled that a disposal of its 36.5 per cent holding could be made within the next 18 months.
Cadbury Schweppes was also in demand, up 16-1/2 at 450-1/2 as investors switched into the stock out of Swiss rival Nestle. The Swiss group was marked lower after revealing disappointing first quarter sales volume growth, with real internal sales coming in well below analysts' forecasts of 4.0 to 5.1 per cent.
The engineers sparkled as Merrill Lynch reiterated its "overweight" sector stance, with the heavyweight broker favouring Invensys, up 12-1/4 pence at 304-1/4 pence, and second liner IMI, 12 pence higher at 248 pence.
The UK's smaller companies suffered less today than their larger cousins, as the effects of the Nasdaq selloff were concentrated on the high-profile technology, media and telecoms stocks (TMTs). The FTSE Small Cap index closed down 32-1/2 points at 3207.4 points. The TMT rout finally began to tell on new tech IPOs. OneClick decided to delay its offering in the midst of the daily markdowns, and Advanced Technologies managed to remain near its offer price of 250 pence.
The vendor of telemetry and wireless equipment for utilities closed at 245 pence, and was lucky to have got off so lightly. And after 150 per cent gains on Tuesday, its first day of trading, Bookham Technology finally fell back as the Nasdaq-fuelled general TMT markdown continued.
Telewest
Telewest Communications, the cable network operator, reported a 47 per cent increase in turnover to £793 million and losses of £530 million for the year to 31 December. The group's CEO claimed that customer loyalty, usage and revenue have all noticeably increased. He added that this, together with strategic steps the company has taken and the cable unique services it is now launching places Telewest in a powerful position to secure the opportunities in the fast moving broadband digital world.
Telewest is entering the next phase of its broadband services, with the introduction of a wide range of interactive services for consumers which will start to exploit the unique advantages of its high bandwidth interactive network and which it expects will progressively distance the company from its competitors.
These services include television e-mail, as well as access to 60 high street brands in a walled garden environment accessible through TeleWest's electronic programming guide direct to the television.
In addition, the cable operator has taken two key initiatives on the internet. Last month, TeleWest launched Surf Unlimited, fundamentally changing the internet model by introducing unmetered usage. To date, this has doubled both its internet customer base and average internet usage. The group has also launched "blueyonder", the first high speed internet service in the UK, which addresses the consumers need for speed, providing permanent always-on connections.
This is expected to change the very nature of internet use in the home, providing rich multi-media content and ending the frustrations inherent in slow dial up internet services. For £50 a month, customers in Telewest's South East franchise can get unmetered, always-on, high speed internet access at 512 kbits per second.
Telewest expects that "blueyonder" will be progressively rolled out across virtually all of its franchises during the second and third quarters of the year.
"Blueyonder" is designed to create a new internet experience, rich in multi-media content. Telewest intends to support this new access product with a branded broadband portal to be launched in July p2000. The product and services stream already in the pipeline will be substantially augmented by the launch of true video on demand in early 2001. Telewest is already running live trials which will, over time, involve 20,000 trial customers. With services and value that now go beyond the competition, it will increasingly focus on marketing and maximising the opportunities to drive penetration and usage and develop additional revenue streams.
Through its merger with Flextech, Telewest has positioned itself to be a major player in the UK media market and is the first company to offer fixed-rate, unmetered broadband internet access.
Please note that the value of investments, and income (if any) yielded by them, may fall as well as rise, and you may not recover the full amount of your original investment. Past performance is not necessarily a guide to the future.
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