By Philip Coggan in London and Adrian Michaels in New York Published: September 7 2000 20:44GMT | Last Updated: September 8 2000 07:06GMT Fears about the impact of the soaring price of oil and the plunging euro spread on Thursday as companies warned investors to expect lower profits. Chemicals group DuPont blamed substantially higher oil prices for increasing its costs and said a weak euro was hitting its revenues as it issued a profits warning. Investors forced Dupont shares down 11 per cent to $41.19 on Wall Street, triggering a decline in shares of its competitors as concerns spread through the chemical sector about the oil-euro squeeze. Dow Chemical fell 7.5 per cent to $25.38 and ICI of the UK and Germany's BASF and Bayer all fell about 2.5 per cent. Electrical group Invensys also issued a profit warnings, citing the weak euro, sluggish capital goods markets and a drop in US housing starts. The shares fell 93.25�p, or 35.7 per cent, to 167�p. "My concern is that the oil price rise will cause a much sharper-than-expected economic slowdown," said Trevor Greetham, global strategist at Merrill Lynch. Peter Oppenheimer, global strategist at HSBC, added that "higher oil prices are likely to push up interest rates in Europe, cause economies to slow and prompt more profit warnings and downgrades". Thursday oil notched a 10 year-high when October Brent crude closed at $34.55 a barrel. Earlier it fell to $33.95 on reports that Saudi Arabia had told President Clinton that Opec was planning to raise production by 700,000 barrels a day. Opec ministers meet in Vienna on Sunday. The euro rebounded off its all-time lows on Thursday as investors showed caution ahead of a meeting of European finance ministers Friday. Traders are concerned that central banks might intervene to support the currency and the euro closed at 87.1 cents in London trading. Profits growth in the US and Europe has been generally buoyant this year thanks to strong economic growth in the first six months. But in recent weeks there have been signs of a slowdown in the US and UK manufacturing sectors while the German Ifo survey of business sentiment has shown that confidence has started to slip. Higher oil prices push up the costs of big corporate users, such as chemical and transport companies, while at the same time prompting central banks to raise interest rates to head off inflationary pressures. While the weak euro helps European exporters, it exacerbates the problem of higher raw materials prices because oil and other commodities are priced in dollars. This adds to inflationary pressures. The European Central Bank raised interest rates last week while the US Federal Reserve and the Bank of England left them unchanged at their most recent meetings. In the US, DuPont said the high oil price and weak euro would cost it more than a $1bn in pre-tax profit for the full year. _______________________________________________ Crashlist resources: http://website.lineone.net/~resource_base To change your options or unsubscribe go to: http://lists.wwpublish.com/mailman/listinfo/crashlist
