European and Asian shares fell sharply in early trading on Thursday after Wall Street slumped to levels not seen since 1997 amid renewed concern about United States accounting methods.
Health care, technology and media shares took the biggest hit as Vivendi Universal, Nokia and AstraZeneca all slid by between 3,5% and 5%. The FTSE 100 was down 90,5 points or 2% at 4 329,6, dipping below last week’s five-year closing low at 4 393.
Drugs stocks took 14 points off the FTSE by midday on Thursday, with AstraZeneca down 3,4% and GlaxoSmithKline down 2,1%. In media stocks, the publishers Pearson lost 3,8% and Reuters shed 4,5% after the investment bank Morgan Stanley cut its rating on the news and information group to ”underweight”.
”We’re sure as hell looking at a crisis. It seems like we’re being hit from all corners, with Qwest being the catalyst,” one senior trader said.
The latest blow to market confidence came on Wednesday when the US telecommunications company Qwest announced that it was the subject of a criminal investigation.
After this news, the Dow Jones industrial average lost 3,1%, sinking to its lowest level since 1997. The latest stock market selloff has raised doubts about Great Universal Stores’ planned flotation on Friday of its luxury fashion brand Burberry.
In Asia, Japan’s Nikkei 225 share index lost 2,5% to close at 10 485 points at midday on Thursday, dragging down markets around the region, even in so-far resilient Australia.
The gloom was sparked by another dismal day in New York, where the Dow Jones Industrial Average lost more than 3% to close below the symbolic 9 000-point level.
US investors, already jumpy about economic fears and the after-effects of September 11, have suffered a crisis of confidence since a series of accounting and ethical scandals at major firms in recent months.
The Dow finally closed at 8,814 points on Wednesday, its lowest level since September 28 last year. On Thursday it slid another 62,17 points, or 0,70%, to 8 751,33 minutes after the opening bell at about 3.30pm (South African time).
The fact that US worries have infected Asian markets is especially telling, since most indexes in the region have performed strongly this year, the BBC reported on Thursday.
Even in Japan, in the throes of a seemingly endless recession, shares have been relatively buoyant in recent weeks.
”With New York stocks in a seemingly bottomless spiral and Europe following, there’s no way we can avoid the fallout in Japan,” said Masaharu Sakudo of Tachibana Securities.
Traders in Tokyo pointed to a scramble for the safe haven of the Japanese government bond market, where prices hit 11-month highs on Thursday.
All Asia’s major markets fell, including South Korea, Singapore, Malaysia and Hong Kong, where the main index dropped 2,4%.
Only Shanghai, traditionally disengaged from global market trends, saw gains, with the main index up almost 4% on the back of domestic news.
In Germany and France, meanwhile, shares fell by more than 4% on Wednesday and might not be able to drop much more before buying kicks in, traders say.
By 3.30pm on Thursday the German DAX was down a further 0,6% to 4 165,49, while Paris’ CAC-40 traded down 1,7% at 3 593,32.