BIG falls in a raft of leading shares and a decline on Wall Street have again shaken European stock markets, while the euro and government bonds pushed up after the European Central Bank left interest rates unmoved.
News and information company Reuters Group Plc and Dutch software supplier Baan Co NV dived more than 12 per cent after announcing disappointing thirdquarter results. Both companies were hurt by customers delaying purchases because of concern over the millennium computer bug.
News that IBM was suffering the same problem sent its stock plunging 20 per cent, and the Dow Jones Industrial Average tumbled more than 200 points, or almost 2 per cent, in the first 15 minutes of trade. That triggered trading curbs, allowing the index to cut its loss to 1.7 per cent. It later closed 10,297.69 (-94.67). There were significant drops for a rack of other European bluechips too: Smithkline Beecham fell 11 per cent on a regulatory set back for a new drug; Mannesmann AG slid 7.5 per cent after agreeing to buy British mobile phone operator Orange Plc for an unexpectedly high £19.8 billion sterling (€30.5 million); and British American Tobacco slumped 9.4 per cent after a US court ruling raised the prospect of more big payouts for ill smokers.
With many of the big losers listed in London, the FTSE 100 index was the worst performer in Europe - down 1.8 per cent. In Dublin the ISEQ index of Irish shares fell 0.22 per cent. Most European bourses slid about 1 per cent, with only France bucking the trend. The Paris CAC 40 edged up 0.1 per cent, helped by rises in Vivendi and Danone.
The most notable gainer was Orange, which rose 6.2 per cent in London after German engineering company Mannesmann's bid.
The Dow's losses added to Europe's stock-market woes and weighed on the US dollar, which slid against the euro after the ECB left interest rates unchanged.
The ECB's decision came as little surprise to the market, dealers said, and the euro blipped only briefly lower before heading to a fresh session high above $1.08 after the ECB left its key refinancing rate steady at 2.5 per cent.
"Very few were anticipating a rate hike today," said Mr David Gilmore, partner at Foreign Exchange Analytics.
But Mr Gilmore said market players' anticipation of an interest rate rise at the ECB's next meeting on November 4th had been undisturbed: "As long as that's in the air, it's going to be difficult for the dollar to rally." The ECB meeting will come after euro-area September M3 money supply data. Mr Jeremy Hawkins at Bank of America in London said the strength or weakness of the September M3 data would determine market expectations for the timing of the next move.
"The euro-zone economy is picking up but the aggregates show sufficient capacity, so that there is no immediate need to raise rates," he said. "M3 money supply for September is likely to sway the market one way or the other on expectations regarding the next move."
