Reed hit by 'baseless' scam claims

PUBLISHER Reed Elsevier was rattled by worries of a US-style accounting scandal just as hyper-sensitive stock markets took an uneasy breather.

The New Scientist publisher fell 3% after a Dutch lobby group promoting accounting transparency claimed that the Footsie stock had artificially boosted earnings.

Reed called the accusation 'baseless'. The price later recovered, closing up 5 1/2p at 561 1/2p.

Vodafone, IT services group Computacenter and infrastructure group Amey have been plagued by similar fears.

One analyst said: 'The market is driven by confidence in earnings and if you don't have confidence then you have to add a discount.'

London is bracing itself for further falls as dealers branded Thursday's 78-point rise in the Footsie to 4471.2 a 'dead cat bounce'.

But Royal Bank of Scotland economists say US figures on Friday showing a rise in employment levels should help equities when Wall Street resumes trading. Keith Skeoch, investment chief at Standard Life, said the fact that 'equities are stumbling as badly as they are reflects a crisis of confidence'.

He said: 'Investors have been badly scarred by the collapse in the technology darlings, and are now finding out the truth about some of the glowing business results published in the boom years.'

Figures next week are expected to show a sharp drop in the profitability of UK companies.

Frontline sectors to have felt the most impact are investment banks, which have raised the capital to fuel the stock market boom. Having axed back-office staff, there are now signs that key bankers are being shown the door.

Merrill Lynch sources played down reports that 25% of its 450 investment bankers will be chopped. But it confirmed that it 'may reduce headcount in some areas'.