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Europe falls on Nasdaq hit
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December 20, 2000: 11:52 a.m. ET
Bourses tumble as Nasdaq, U.S. markets hit by disappointment with Fed
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LONDON (CNNfn) - European markets were hammered Wednesday, with tech stocks especially hard hit after U.S. markets continued to fall a day after the U.S. Federal Reserve failed to cut interest rates yet warned of a slowing economy.
European shares traded in the red all session, but once Wall Street opened with a sharply negative tone, the selling redoubled in Europe.
London's FTSE 100 fell 129 points, or 2.0 percent, to 6,181.5, with chip designer ARM Holdings (ARM) topping the loser board with an 11 percent decline. "New economy" stocks in the technology, media and telecom sectors accounted for the bulk of the decline.
In Paris, the blue chip CAC 40 index fell 164 points, or 2.75 percent, to 5,794.92, with telecom network supplier Alcatel (PCGE) dropping 11 percent after trading in the stock was halted briefly with the shares limit-down.
Frankfurt's electronically traded Xetra Dax fell 162 points, or 2.5 percent, to 6,317.61. Chip maker Infineon Technologies (FIFX) retreated 6.2 percent and components firm Epcos (FEPC) crashed 8 percent, while weak bank stocks added to the index's losses. Only five stocks among the 30 shares in the index inched higher.
In Amsterdam the AEX index fell 2.2 percent. Semiconductor equipment maker ASM Lithography fell 5.1 percent and Europe's biggest consumer electronics maker Philips Electronics tumbled 7.6 percent.
The SMI in Zurich was 1.0 percent lower, while the MIB30 in Milan shed 2.2 percent, led by a 4.8 percent drop for Internet company Seat Pagine Gialle.
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The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, plunged 3.0 percent, with its information technology sub-index falling 9 percent and its computer services and software sector down 7.5 percent.
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In the U.S. Wednesday, the Nasdaq composite index fell 4.6 percent to 2,395.34 in the first hour of trade, while the Dow Jones industrial average lost 1.6 percent. Markets continued their decline from Tuesday, when the Federal Reserve left interest rates unchanged at 6.5 percent, but shifted from its previous stance of targeting inflation as the major risk facing the U.S. economy.
"The wording underlines that the Fed is obviously worried about a sharper economic slowdown than the market had anticipated," said David Brown, an economist at Bear Stearns. "I think we're on track for three one-quarter-point cuts from the Fed in the first half of next year."
In the currency market, the euro rose to 90.70 U.S. cents from 89.52 cents in late trading in New York Tuesday, hitting its highest level since mid-August.
Techs hammered
Chip-related stocks were pummeled across Europe. Franco-Italian chip maker STMicroelectronics (PSTM) shed 8 percent in Paris while German electronic components maker Epcos (FEPC) shed 5.3 percent. 
Elsewhere among techs, Autonomy (AU-), a British maker of search engine software, fell 10 percent, Europe's biggest software company SAP (FSAP) fell 9 percent in Frankfurt and French consumer electronics maker Thomson Multimedia (PMMB) drooped 5 percent in Paris.
U.K. mobile phone company Vodafone Group (VOD) shed 3.5 percent. The world's biggest cell phone operator agreed to buy 15 percent of Japan Telecom Co. for $2.2 billion, giving it greater access to the Japanese company's mobile business.
British Telecommunications (BT-A), which owns 15 percent of Japan Telecom and 20 percent of J-Phone, dropped 3.5 percent amid concerns it may be pitched into a battle for control of the mobile phone unit, threatening to derail its plan to expand in Japan.
Other telecom operators also weakened: France Telecom (PFTE) fell 5 percent, while Olivetti lost 4 percent in Milan.
Finland's Nokia, the world's biggest mobile phone handset maker, sank 7 percent and Sweden's Ericsson tumbled 9 percent.
Among software and computer technology companies, Cap Gemini (PCAP) fell 5 percent in Paris, Britain's Logica (LOG) fell 7 percent and accounting software maker Sage Group (SGE) dropped 6 percent.
Outside the "new economy" sectors, Diageo, the world's biggest spirits company, shed 5 percent after striking an agreement to buy the bulk of Seagram's wines and spirits empire for $8.1 billion in cash. Its partner in the deal, France-based Pernod Ricard (PRI), jumped 10 percent.
Vivendi Universal (PEX), which is selling the Seagram business, dropped 4 percent.
German banking stocks were generally weaker. Dresdner Bank (FDRB) dropped 4 percent, rival Deutsche Bank (FDBK) dropped 4 percent and Commerzbank (FCBK) shed 2.5 percent.
Among the few winners in Europe, European Aeronautic, Defense & Space Co. (PEAD) rose 3.3 percent after Airbus Industrie, in which it holds an 80 percent stake, announced it would go ahead with the construction of a 555-passenger superjumbo to compete with Boeing Co.'s (BA: Research, Estimates) 747 Tuesday.
German automaker BMW rose 1 percent. Chairman Joachim Milberg said late on Tuesday that annual profit from ordinary activities would be significantly better than 1997's record level of about  1.3 billion ($1.2 billion). Sales in 2000 would exceed last year's 34.4 billion, he said, despite the sale of the Rover unit in the spring. 
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