LONDON, April 8: Britain’s leading shares fell to their lowest level for over five weeks on Monday as mounting tension in the Mideast and an earnings warning from US computer giant IBM combined to unnerve investors.
Telecoms company BT Group failed to lift the mood as its shares fell two per cent after a strategic review from the company contained few new elements, analysts said.
The FTSE 100 benchmark share index closed down 55 points, or 1.1 per cent, at 5,178.6, its lowest closing level since March 1 and its biggest one-day fall since the end of February. The index drooped as low as 5,149.3 during the day.
Dealers said the market was hit by several setbacks. Concern about tension in the Mideast and the impact of high oil prices intensified at mid-morning when Iraq said it would cut oil exports for one month.
Later, IBM warned of a heavy shortfall in quarterly revenue, sparking an early sell-off on Wall Street and denting confidence in technology, telecoms and other “growth” stocks in Europe.
The telecoms sector accounted for 16 points of the FTSE’s drop, as joining BT in the negative column were Cable & Wireless down 3.7 per cent and Vodafone down 3.4 per cent.
Oil stocks held steady and BP finished unchanged, but dealers said the rise in Brent crude oil futures prices following the Iraq news had a negative impact on other sectors.
But microchip designer ARM Holdings held at the top of the FTSE 100 leaderboard after Merrill Lynch added the stock to its Europe One Recommended List. ARM shares closed up 1.9 per cent.
Meanwhile, US stocks languished in negative territory at midday on Monday after International Business Machines Corp. unleashed its first earnings warning in more than a decade — dealing another blow to the market after Iraq cut off oil exports for a month.
IBM, the world’s No. 1 computer maker, stunned Wall Street by warning that spending cutbacks by corporate customers would slam earnings and revenue. IBM, long viewed as a safe haven, warned of a hefty first-quarter shortfall — eroding hopes that companies will signal profits are on the mend as quarterly earnings reports trickle in this week.
The blue-chip Dow Jones industrial average fell 87 points, or 0.85 per cent, to 10,183, after sinking more than 1.4 per cent earlier in the session. IBM accounted for the majority of the Dow’s drop.
The technology-packed Nasdaq Composite Index surrendered 22 points, or 1.27 per cent, at 1,747, after sinking more than 2 per cent. The broad Standard & Poor’s 500 Index lost 6 points, or 0.55 per cent, at 1,116.
Losers outnumbered winners by a ratio of about 4 to 3 on the New York Stock Exchange and almost 2 to 1 on Nasdaq. More than 532 million shares changed hands on the Big Board, and more than 788 million shares on Nasdaq on moderate volume.—Reuters