Markets succumb to sell-off

Investors reel in horror at Siemens' disappointing outlook

LONDON, England (CNN) -- Global financial markets were jerked violently lower on Wednesday as investors' confidence was shaken by renewed accounting concerns in the United States and weak corporate profits in Europe.

The new round of selling was sparked by news on Tuesday that U.S. congressional investigators were looking into whether banking giants Citigroup and J.P. Morgan Chase helped energy trader Enron to hide its debts before it went under.

Panic selling quickly spread on Wednesday from Wall Street to Asia, where all major markets fell by between two and five percent, after previously fighting off the panic that hit markets in other parts of the world in the past week. (Full report)

European markets, which plunged to five-year lows during Wednesday's session, managed to cut some of their losses but still ended mostly in the red for the fourth straight day -- even as Wall Street staged a minor recovery in early trading after J.P. Morgan denied any wrongdoing in the Enron affair. (Full story)

London's FTSE 100 lost 2.1 percent, or 80.9 points, to a six-year low of 3,777.1, while the CAC 40 blue chip index in Paris fell 1.5 percent, or 46.47 points, to 3,023.69.

Meanwhile, Frankfurt's electronically traded Xetra Dax was up 1.4 percent, or 47.56 points, to 3,563.39 in late trading (the German market was set to close at 1800 GMT). At one point, the Dax was down almost 7 percent to its lowest level since April 1997.

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 1.6 percent at five-year lows.

European markets began falling on Wednesday in response to another sell-off on Wall Street on Tuesday that followed Citigroup and J.P. Morgan probe.

Stocks continued slide after Siemens, Germany's biggest electronics and engineering company, issued a profit warning, saying fourth-quarter profit would be below its current third-quarter as orders slump. (Full story) Siemens (FSIE) was down 0.5 percent to 50 euros, after losing as much as 6 percent during the session.

"The earnings so far are not inspiring but it's the guidance people are looking at, not the numbers, and this has not been wonderful," Chris Woods, chief investment officer at State Street Global Advisors, told Reuters.

Technology stocks were battered after Siemens posted its disappointing outlook. Sweden's Ericsson, the world's biggest supplier of mobile phone communications networks, fell 8.1 percent to 10.20 crowns. Nokia, the world's biggest mobile phone maker, which fell more than 5 percent in earlier trading, recouped some its losses to close down 0.4 percent at 11.60 euros.

STMicroelectronics (PSTM), Europe's biggest chipmaker, fell 4.7 percent to 22.40 euros after it posted a second-quarter net profit but said revenue would grow only slightly in the coming quarter. (Full story)

ABB, Europe's biggest industrial engineering group, plunged 19.5 percent to 8.78 Swiss francs. Earlier on Wednesday, it said first-half net profit fell 62 percent to $101 million -- worse than expected -- but it maintained its 2002 earnings guidance. (Full story)

Insurers, which have pumped vast amounts of money into the market to cover claims on policies, were mixed at midday on Wednesday after the sector posted huge losses in the previous session.

Axa (PCS), Europe's biggest insurer, dropped 11.5 percent to 9.90 euros, while Prudential (PRU) -- Britain's biggest insurer by market value -- lost 1.3 percent to 438 pence after saying operating profit fell 15 percent as it racked up bond and stock maker losses. (Full story)

Banking and financial stocks were hit by Citigroup and J.P. Morgan's involvement in Enron's accounting problems.

Meanwhile, German drug maker Bayer (BAY) was down 1.3 percent to 24.99 euros in late Frankfurt trading. It said on Wednesday that the U.S. Food and Drug Administration had approved its erectile dysfunction drug Vardenafil in principle but asked for additional studies which would delay the launch until next year. (Full story)

Among the gainers on Wednesday was PSA Peugeot-Citroen (PUG), Europe's second-largest carmaker. It was up 3.5 percent to 42.65 euros after posting lower profit -- but better than expected -- as it reorganised its business in Argentina and Spain. (Full story)

The AEX index in Amsterdam fell 3.7 percent and Milan's MIB30 index lost 1 percent, while the SMI in Zurich declined 0.5 percent.

In the U.S. on Wednesday, markets pulled out of an early dive and turned higher on the strength of positive corporate news from 3M, Merck and Exxon Mobil. (Full story)

At midday, the Dow Jones industrial average rose 108.33 to 7,810.67; it was as much as 182 points lower early in the session. The Nasdaq composite index added 3.65 to 1,232.70, while the Standard & Poor's 500 index tacked on 3.45 to 801.15.