London shares slump midmorning

Leading shares slumped to 8-month lows in midmorning deals, with just one blue chip in positive territory as investors fretted over Wall Street's precipitous falls overnight, yesterday's dismal retails data and a raft of poor news from the US tech sector, dealers said.

At 10.14 am, the FTSE 100 index was 103.4 points lower at 4668.5, just above a low of 461.8. All the wider indices were also sharply lower.

Volume was average, with 667.4 million share changing hands in 34,238 transactions.

Overnight on Wall Street, the DJIA closed 114.91 points lower at 9,502.80, while the Nasdaq composite index shed 22.23 points at 1,496.89, hit by the much weaker-than-expected retail data and Lucent's revenue warning.

Positive news from the latest UK labour market report failed to budge the cloud of gloom resting over the market today.

Unemployment in the UK fell more than expected in May, with the claimant count down 7,000 to 0.944.6 million. Analysts polled by AFX News had anticipated a decline of 5,000.

Early this afternoon, US industrial output is expected to have increased by 0.3% in May after rising 0.4% in April.

But the key economic interest for today is the latest University of Michigan consumer sentiment index, which is forecast to fall slightly to 96.6 in the preliminary reading for June, after rising to 96.9 in May's final reading.

Technology, media and telecom players remained under pressure in midmorning deals from a raft of dismal news from their US peers and after Wall Street's fresh tailspin overnight.

US telecom firm Sprint compounded the damage inflicted by Lucent's revenue warning yesterday, by issuing an alert on subscriber growth overnight. The news prompted Merrill Lynch to downgrade its stance on the US wireless sector.

Sprint also warned that full year revenue for its largest unit, FON Group are likely to have declined more than previously forecast.

Meanwhile, a sales warning from Genesis Microchip and news that software firm Abode expects Q2 losses to come in worse than Wall Street estimates further undermined sentiment among digital economy plays.

In response, battered mobile phone operators resumed their downward march: Vodafone slid 5 pence to 89-1/2 and mmO2 fell a penny to 37. Goldman Sachs repeated its 'outperformer' rating on both stocks this morning, trimming Vodafone's 2002 and 2003 estimates but raising those for mm02.

Second line telecom firm Telewest lost 0.90 to 3.30, a fall of 21%, as chances of a debt-for-equity swap increased on news that Liberty Media Group is bidding for £240m (€373m) worth of the group's bonds.

In the tech sector, ARM plunged 7 to 156 while Logica slipped 9-1/2 pence to 203. Both stocks will soon be relegated to the midcaps following the FTSE reshuffle earlier this week. Sage, which will be the sole survivor of the tech boom among the blue chips, reversed its early gain to decline 4-3/4 to 160-1/4.

The weakness spread to the midcaps, London Bridge Software lost 4-1/2 to 93 while CMG fell 3 to 117.

Back among the blue chips fallers, media stocks slid as bears came out to question the extent of the global economic recovery following yesterday's dismal US retail sales data.

WPP remained sharply lower, down 30 at 591, still knocked by reports of acquisition accounting woes at US rival, Omnicon Group. Elsewhere in the sector, EMI fell 10 to 240 and BSkyB slipped 19-1/2 to 649-1/2.

Financial issues were weak once again. Sentiment in the banking sector remained shaken by Abbey National's profits warning at the start of the week while life assurers continued to be hit by fears ahead of the publication of the treasury-backed Sandler report.

In UK corporate news, leading food retailer Tesco fell after reporting like-for-like sales growth in the UK of 4.5% for its first quarter to May 18.

That was in line with market forecasts and the group's own target, with total UK sales up 7.4%. Brokers were positive in response but shares in the group tracked the wider market, sliding 8 to 246-1/2.

There was just one blue chip riser at midmorning: BG up 2-1/2 at 283.

On the second line, Woolworths reversed early falls to plunge more than 9% after disappointing investors with news that merger talks with BHs have been terminated.

But Innovation Group rallied 5 pence to 98 after reassuring the market last night that its relationship with Royal Sun Alliance remains good and that it does not believe RSA's decision to cancel the Once Stop Claims programme will have a significnat effect on the firm's trading performance this year.

Among small caps news, Retail Decisions was the biggest casualty, sliding 2-3/4 to 5-1/2, following a warning that 2002 pretax profit before exceptionals is likely to come in significantly below market expectations.

Placing news drove shares in Vianet Group down 3 to 8-1/2. The firm, which makes equipment used to remotely monitor vending machines, said it is placing £2m (€3.1m) worth of shares and raising the same amount via a 2-for-1 open offer as part of plans to raise £4.2m (€6.5m) of new cash.

On the upside, Actinic was higher after announcing that it is being taken private through a management buyout for £1.

Shareholders cheered news that following the liquidation and delisting of the remaining cash shell they will receive about 7.95 pence per share. Shares in the group rose 2 pence to 7-1/4.

Biotech firm, Xenova Group firmed 3/4 penny to 51-3/4 after revealing that Phase I trials of its new TA-NIC anti-nicotine vaccine have been "successful".

Elsewhere among the risers, Touchstone jumped 11-1/2 pence to 146-1/2 on news that it will be paying out a special dividend of 3 pence and that trading in the current year is beating that seen in the same period last year. The software supplier also unveiled increased pretax profits for the full year.