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Footsie 'faces fall to 3,000'

Richard Wachman | 29.07.2002 06:03

Disaster looms for shares as consumer confidence vanishes and the Pink 'un's fortunes plunge



THE FTSE-100 index of shares in Britain's biggest companies is set to plunge to around 3,000 points in one of the biggest stock market corrections since the Depression of the Thirties, say leading City experts.
The London arm of Japanese bank Nomura warned its biggest investors in a briefing note this weekend: 'Another 20 per cent slide is possible. There should be no rush to re-enter this market.'

Nomura's view is backed by Merrill Lynch, the giant US investment bank. Its global market strategist, Chaudry Khuram, said: 'The market runs on fear and greed - greed on the way up and fear on the way down. Today the market is not cheap, just reasonably priced.'

Khuram believes the FTSE will touch 3,500, or lower. On Friday it closed up 50 at 4016.6 after a rollercoaster week that saw it fall below 3,900.

A number of professional investors are understood to have indicated they expect the FTSE to fall to 3,200 within a month, before staging a recovery towards the end of the year.

The big question now is whether the sharp fall in stock markets on both sides of the Atlantic will provoke a consumer-led recession in the US, which would affect confidence around the world.

Nomura market strategist Anais Faraj said: 'Globalisation is a problem at the moment in that the Europeans are selling to cover losses sustained in the US.

'The same is true of Asian investors, who drove Tokyo lower last week. We are shackled to America; the only way to break that shackle is to wind Wall Street down.'

Confidence among American investors - which was already severely dented by the accounting scandals at Texas energy group Enron and telecommunications company WorldCom - was jolted again.

This time AOL Time Warner, the media group, disclosed that its accounting practices are being investigated by the US Securities and Exchange Commission (SEC).

Robert Shiller, a US economist and author of the book, Wall Street, Irrational Exuberance, added to the gloom by saying that even after a 40 per cent fall in share prices since the dotcom boom, markets are still overvalued by historical standards.

'Company profits in the US fell by half last year, and there's not been such a striking decline since 1921. To be in line with historic ratios, markets have to come down another 40 per cent,' he warned.

The SEC has given company chief executives until 14 August to own up to misdeeds, compounding fears of more scandals ahead.

Richard Wachman

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  1. good stuff — waiting 4 a crash