European stock markets are down sharply on unfolding news of the massive accounting scandal at the American telecommunication firm WorldCom.
This latest U.S. corporate scandal involving accounting irregularities of nearly $4 billion has sent shudders throughout Europe.
In the first few minutes of trading, share values dropped nearly four percent in London, Frankfurt and Paris.
Traders fear the extent of the WorldCom accounting fraud could eclipse the damage caused by the collapse of U.S. energy giant Enron. Both firms employed the services of Arthur Andersen, the auditing company that is facing charges of criminal wrongdoing for its role in the Enron collapse.
The plunge in share prices in London was widespread, with all the stocks on the Financial Times 100 index losing value.
Market analyst Justin Urquart Stewart says a lack of trust is responsible for the downward trend. Traders simply do not know if other financial scandals are out there waiting to be unearthed. "This market at the moment will have no opportunity to recover until people have confidence in business," he said. "It is not only just a matter of all the political issues around the world. It is not a matter necessarily of the economy not growing particularly well. It is actually that we look at sets of accounts from companies and are not too sure if we believe what we are seeing."
The nervousness in the European markets has sent stock prices down to near the lows last seen just after the September 11 attacks.
Meanwhile, the market fears about the honesty of accounting practices at big firms and the overall health of corporate America are causing the dollar to slip overseas. The euro has now moved to within one cent of one-to-one parity with the dollar. And gold prices are up around one percent, fueled by the uncertainly.