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Tuesday, 3 September, 2002, 20:47 GMT 21:47 UK
Jitters send shares tumbling
Share prices have dropped sharply in the United States, Japan and Europe over worries about the strength of the US economic recovery.
In London, the FTSE 100 index dipped below the 4,000 level at one point for the first time in four weeks as investors reacted to the falls in the US.
The FTSE eventually recovered slightly, but still closed down 152.3 points at 4,028.6, a fall of 3.6%.
Share prices across Europe also dropped sharply. In France the Cac 40 index closed down 4.5% at 3,126.6, while in Germany the Dax plunged nearly 6% to 3,398.99.
Worries over the health of the US economy increased following the release of figures which showed weak growth in the manufacturing sector.
And the gloom was not helped by one investment bank lowering its revenue forecast for Intel, the world's largest maker of microprocessors for computers.
"We're back to work from a not-so-good August," said Arthur Hogan, chief market analyst at Jefferies & Co.
"We came in with a couple of downgrades and just a general sense the economy hasn't picked up the way we would like to see it."
Oil shares fall
The falls in London, which took the gloss off the past month's modest rally, were led by sharp declines in the shares of leading oil firms.
Oil prices, which had soared amid worries about a second Gulf War, stumbled as Baghdad made conciliatory noises and Opec, the oil producers' cartel, indicated it might raise output.
BP shares fell 31 pence to 468p, while shares in Shell dropped 28p to 406p.
Analysts in London were also keeping their eye on the situation in the US.
"There's a broad uncertainty over the [US] economic recovery," said BNP Paribas equity strategist David Thwaites.
"Without a pick-up in the economy, you then start to question what happens to corporate earnings."
Some economists fear that the US is sliding into a "double-dip" recession, and that this year's apparent recovery is little more than an illusion.
"No matter how you crunch it, the economy is cooling. Whether it double dips is another matter, but it certainly is slowing down," said Larry Wachtel, analyst at Prudential Securities.
The same fears are being played out in Europe, especially in Germany, and even in the more resilient UK where economic growth is more sluggish than hoped.
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