Investors were heading for the stock market exits in droves yesterday as an element of semi-panic induced by the recent flood of profit warnings on both sides of the Atlantic saw all the main FTSE indices plummet. And it was not only the recent profit warnings that briefly scared even the most hardened market operators.
News that Fitch, the credit ratings agency, had put 19 major Japanese banks on credit watch put the skids under a banking sector already suffering from the effects of the recent referral of the Lloyds TSB bid for Abbey National and the Competition Commission's condemnation of the banks' policies towards small and medium sized businesses.
The Fitch story was said to have spawned some even more dramatic rumours which hit the market over lunchtime. The rumours ranged from talk of a big sell programme, linked to the liquidation of a European hedge fund - a story not substantiated by market volume - to the failure of a major Japanese bank and fund management group.
While none of the rumours could be verified, the mood in the market remained one of dejection as Wall Street followed up its highly encouraging overnight performance with a dramatic 330 point slide in the Dow Jones Industrial Average within 20 minutes of the opening of US markets.
London's response was an initial gain of 21 points on the FTSE 100. That was wiped out within the hour and the 100 index thereafter came under ever-increasing pressure which reached a session peak shortly before Wall Street came in.
At its worst when the rumours reached fever pitch the index was down 249.6, or 4.4 per cent, at 5,471.1, only a fraction above the perceived crucial support level of 5,468.
An ensuing rally drove the index back up to around 5,665 before the auction process produced a close of 5,625.9, down 94.8. Over the last four sessions the index has fallen 377.3, or 6.3 per cent. It was a similar picture for the rest of the market where the FTSE 250 was left nursing a 124.3, or 1.9 per cent, decline at 6,253.5. The SmallCap lost 36.2, or 1.2 per cent, and the Techmark 100 41.85, or 1.9 per cent, at 2,136.58.
The dramas completely overshadowed the day's domestic economic news which showed UK unemployment falling below the one million mark for the first time in more than 25 years.
