After Dashed Hopes the LSE Looks for Signs of Recovery; LONDON STOCK EXCHANGE: Widespread Optimism Was Dispelled as US Slowdown Rippled out across the Atlantic

Article excerpt

Steve Hawkes and Abigail Townsend of the Press Association's City Staff review performance of the London Stock Exchange in 2001.

WHEN City commentators made bullish forecasts at the beginning of 2001, no-one could have predicted the dire occurrences in the US that were to have a massive impact on employment and economic growth.

The year, which started out with high corporate activity, robust company earnings and buoyant economic predictions, has been one which will be looked back on as a turning point in history.

As we reach the end of a momentous year, City minds are on the year ahead - questioning what the future is for the economy, markets, corporate health and above all, optimism.

January

OPTIMISTS were easy to find as the markets reopened with several City experts bullishly predicting the FTSE 100 Index would end the year above 7,000. The Footsie opened for business at 6,222.5 with hi-tech stocks trading at levels that would soon fade into memory. Marconi hit 785p during the month while Baltimore Technologies was changing hands at 427p.

Takeover talk dominated proceedings with Powergen surging on speculation of a bid from German giant E.ON and Lloyds TSB gatecrashing Abbey National's planned tie-up with the Bank of Scotland. Housebuilders Bryant and Beazer also saw their merger plans crumble as Taylor Woodrow swooped for Bryant and Persimmon tabled a bid for Beazer.

As talk of interest-rate cuts began to circle, two other companies came under fire. Flintshire-based frozenfood chain Iceland's market value plunged as founder Malcolm Walker resigned after a controversial share sale and rail operator Railtrack warned the cost of its post-Hatfield upgrading work would be double original forecasts. The Footsie ended the month at 6,297.5 - up 1.1pc.

February

THE gloom in the US began to spread to the City as the first wave of job cuts on the other side of the pond pushed the FTSE-100 Index below the 6,000 level for the first time in 14 months. Canadian giant Nortel Networks slashed 10,000 jobs and Dell Computers made its first reduction in head count. In the UK, steel giant Corus said it would be cutting 6,050 staff, half of whom were in Wales.

The Bank of England cut interest rates to 5.75pc but fears of a mortgage price war hit banking shares.

Lloyds's bid for Abbey was sent to the Competition Commission while the Halifax bought troubled Equitable Life's assets for pounds 1bn.

Other deals saw power giant Innogy buy Yorkshire Power while computer services group Sema was swallowed by US firm Schlumberger.

Telecom shares were starting to slip, with BT hit by fears over its growing debt mountain and talk of a rights issue. Orange floated on the stock market at 639p, a price below parent France Telecom's initial forecast.

The Footsie ended the month at 5,941.2 - down 5.7pc.

March

AS the foot-and-mouth crisis escalated, concerns about the global economy gripped the market with the FTSE 100 Index tumbling to its lowest level since October 1998. The Footsie at one point plunged below 5,300 as profit warnings and job cuts became the reality in the UK.

Engineering group Invensys cut 2,000 jobs and was one of several firms warning it would be hit by the slowdown. In the US, the Dow fell to its lowest for two years as the Federal Reserve cut interest rates by 0.5pc, not the 0.75pc Wall Street looked for.

Weakness in the US hi-tech sector continued with 5,000 more jobs axed at Nortel and matched by Compaq.

Marks & Spencer also shed 4,390 jobs as it unveiled restructuring plans, while the Prudential bid pounds 18bn for US insurance giant American General. A year on from the tech boom, Marconi slumped to 340p. The Footsie ended the month at 5,633.7 - down 5.2pc.

April

GRAND National winner Red Marauder reflected the colour of FTSE100 firm Railtrack's shares as it tumbled towards the FTSE 250 index, while corporate activity among its fellow blue-chips gathered pace. …