BBC Wednesday, 25 July, 2001, 11:35 GMT 12:35 UK London shares hit 33-month lows

Shares in London have hit their lowest levels for nearly three years as the economic gloom continues to grow.

The FTSE 100 index of leading shares dropped 50 points to stand at 5,270 by 1130 GMT.

The index has not closed this low since October 1998 in the wake of the Asian financial crisis. It first reached these levels in September 1997.

Investors' mood turned gloomy after a key quarterly survey of business trends indicated confidence over export prospects among bosses had fallen to a three-year low.

Attention also focused on mobile phone giant Vodafone, which was expected to face tough questions from investors at its annual meeting over executive pay packages.

Its shares fell to 138.75p - their lowest since 1998.

Stock markets in Frankfurt and Paris were also significantly lower in early afternoon trading.

Steady start

The FTSE's tumble came despite modest gains in Japan, where markets shrugged off gloomy corporate news from the United States.

US stock index futures were pointing to a steady start on Wall Street, following Tuesday's bloodbath, in which the Dow Jones Industrial Average shares index, reflecting the value of some of the United States' 30 largest firms, closed down 185 points at 10,239.

The technology-dominated Nasdaq stock market had also continued to fall, to stand 30 points lower at 1,958 at the close, after one of the blackest days for corporate news in months.

Wage bills

Within a few hours on Tuesday there were announcements of more than 35,000 job cuts, at firms ranging from US telecoms giant Lucent to European conglomerate ABB and media goliath Reuters.

As profits continue to plunge, there are expected to be more job losses to come as companies focus efforts on reducing costs, in particular their wage bills.

Federal Reserve chairman Alan Greenspan told the Senate Banking Committee that another cut in interest rates might be on the cards if the US economy did not improve.

But Mr Greenspan told the committee that the bank's series of rate cuts was now working, and that monetary policy was still a useful tool to prod the economy.

"At the end of the day it does seem to be effective," he said.

Job losses

Reuters confirmed that it would be getting rid of 1,100 jobs, while the Swiss-Swedish group ABB plans to lay off a hefty 12,000 positions.

The UK electronics and engineering group Invensys also plans to cut 2,500 jobs worldwide, blaming "extreme trading conditions".

Similarly, the US telecom company Lucent Technologies, which has been struggling against tough business conditions for some time, says it will cut a further 15,000-20,000 jobs.

And Arrow, an American electronics company whose profits have dropped by more than 90% in the second quarter, said it would be cutting 1,000 of its 12,000 staff.

Mass layoffs

For Reuters, the job cuts, which amount to nearly 7% of its workforce, represent one of the biggest mass layoffs in the company's 150-year history.

The aim for most companies is to improve their competitiveness and reap the long-term benefit of slashing operating costs.

"Our goal to grow the business remains unchanged and we are taking action now to improve our competitiveness," said ABB president and chief executive Joergen Centerman, explaining why job cuts were deemed necessary.

In the short term, however, staff redundancies can prove expensive, in terms of one-off charges.

The US financial services giant American Express, which announced last week that it was eliminating up to 5,000 positions, will take a $1.2bn charge for restructuring the company.

Last week's casualties

The latest cuts continue a recent spate of jobs being axed.

Last week, Canada's Nortel Networks said 7,000 jobs would be cut during the next two months, the balance of the 30,000 job cuts it announced earlier in the year.

Europe's biggest consumer electronics company Philips also announced last week that it expected to cut 4,500 to 5,500 jobs, or 3% of its work force, in its semiconductor unit.

In the UK, the beleaguered telecom company Marconi wants to cut 4,000 jobs across the world, despite the ire of UK trade unions.

Meanwhile, the Swedish mobile phone company Ericsson hopes to save 20bn kronor ($1.87bn) in costs through cutting 12,000 jobs and closing factories worldwide.

-- Anonymous, July 25, 2001