Stocks slide after Nasdaq low

The Nasdaq market has closed at its lowest level in seven weeks, amid worries that a slowing US economy could dampen growth for high-tech companies.

The technology-heavy Nasdaq Composite Index tumbled 107.03 points - a drop of 4.41% - to 2,318.35, its lowest close since 2 January.

On Tuesday, the UK's main stock index also closed at its lowest level for 16 months, as US shares failed to provide the lift investors had hoped for.

The FTSE 100 index, which measures the share price among the UK's top listed firms, ended Tuesday down 113.9 points at 5,980.1.

The index has not closed below the key 6,000 level since April.

Traders blamed the slide on a weak opening by US stocks, which provide the lead for investors worldwide.

US malaise

While the FTSE had opened steadily, another torrid day for banking stocks, compounded by a lack of direction in the main US indices, the Dow Jones and Nasdaq, saw UK shares slump sharply in late afternoon trade.

"There is still this general malaise coming out of the US," said Deutsche Bank economist Bob Semple.

The Nasdaq had already declined 5% on Friday.

"Nasdaq was expected to open up and it opened down," said Alex Stewart of Dresdner Kleinwort Wasserstei on Tuesday. "The FTSE just plummeted through resistance levels."

At the close of trading in the US, John Forelli, senior vice president at Independence Investment Associates Inc said: "Earnings have come in weak and it seems like investors are losing confidence that Corporate America is going to pull us out of this slowdown.

"They are focusing more on the consumer doing it now."

The blue-chip Dow Jones industrial average also fell 68.94 points, or 0.64%, to 10,730.88, and the broader Standard & Poor's 500 Index dropped 22.59 points, or 1.74%, to 1,278.94.

Japanese shares, meanwhile, are hovering near their lowest level for 28 months.

Mortgage war

UK bank stocks weakened on Tuesday as the Halifax announced a low cost mortgage, stoking the war in the sector which broke out on Monday when Nationwide announced it would drop its rates.

FTSE facts

Closed on Tuesday at lowest level since Oct 1999

All time closing high: 6,930.2 (30 Dec 1999)

Last time closed below 6,000: 17 Apr 2000

Performance in 2000: -10.2%

Performance so far in 2001: -3.9%

Source: Datastream/ICV

Shares in Royal Bank of Scotland fell 4.2% on Tuesday, with Alliance & Leicester stock shedding 3.67%, and Halifax closing 3.46% lower.

Analysts also noted the weakness in shares in mobile phone giant Vodafone which was overtaken on Monday by BP Amoco as the UK's most valuable company.

Despite an early rise, the mood changed later with its shares closing 8p lower at 190p.

"Vodafone has not produced the bounce that some people were expecting, and is still below 200p, which is a little worrying," said Tony Jackson, strategist at ING Barings Charterhouse Securities.

Vodafone's decline pulled down other telecoms firms with it, including British Telecom which ended 3.9% lower at 586p.

Outlook for UK shares

The loser board was headed by pharmaceuticals giant GlaxoSmithKline, which fell 5.3%, more than wiping out 2.2% rise in the firm's stock on Monday.

Traders blamed profit-taking for the decline ahead of the firm's results statement, due out on Wednesday.

The outlook for UK shares when markets reopen on Wednesday depends largely on the performance of US stocks, Dresdner's Alex Stewart said.

"We have to wait for the close of the Nasdaq," he said.