A profit warning from Heineken left London-listed brewers nursing nasty hangovers yesterday. Scottish & Newcastle dropped 21p to 378p while SABmiller gave up 23p to 405.5p as the world's third-largest brewer warned that profit growth had stalled in the first half of the year due to a drop in volumes across Europe and the US.

It seems people are drinking less beer, particularly in Europe, where the French market has contracted by 10 per cent. Greece and Holland are also believed to have experienced sharp falls in demand leaving Heineken struggling to meet forecasts for its current financial year. The move by the Dutch group is unprecedented in its recent history, according to analysts, and hit sentiment towards the wider brewing sector hard as Heineken was widely viewed as the "safety play" in the industry.

Heineken blamed the war with Iraq, the strength of the euro against the dollar and bans on smoking in the US for the profit warning which left its shares down more than 12 per cent. The company said bans on smoking in New York and Boston bars had hit beer consumption in America, meaning that the brewer will be unable to reach its target of increasing sales by 7 per cent. On the currency front, the euro's jump against other currencies is expected to reduce operating profits by at least Ê25m for the first half of the year at Heineken.

Meanwhile profit warnings from Unilever and the US hospital operator Tenet Healthcare sent the FTSE 100 72.2 points lower to 4,087.9 as bears came back with a vengeance. The FTSE 250 gave up 39.1 points to 5,004.2 . All eyes are now on tomorrow's US Federal Reserve interest rate decision with most in the market expecting a 25 basis point cut from the US central bank. Among the few blue chips to end the day higher, Northern Rock rose 8p to 725p, Smiths Group ticked 0.5p better to 703p and British Land added 0.25p to 501.25p.

Go-Ahead also avoided the carnage, holding steady at 742.5p, as Credit Suisse First Boston upgraded its price target and earnings forecasts following a pre-close period conference call.

Vodafone lost 2.75p to 120.25p, mm02 gave up 1.5p to 56.25p and Orange dropped 9p to 507.5p amid worries that the mobile phone trio are likely to be losing market share to Hutchison's new "3" packages. Investec Securities believes Hutchison is gaining new customers at a rate of 2,000 to 3,000 per day and was yesterday heard arguing that mm02 is most vulnerable of the three because of its hefty exposure to the UK, which is currently being targeted by the Honk Kong group. The UK and Ireland account for about 80 per cent of profits at mm02 compared with a more modest 15 per cent at Vodafone.

EasyJet improved 14.75p to 225.5p as Merrill Lynch hiked its rating to "buy" from "neutral" and set a 250p price target. "The principle reason for our change of stance is that we are raising our estimates to reflect a potentially less bad revenue environment than we had previously anticipated," the US brokerage said. It believes that next month's trading statement from easyJet could well act as a catalyst to spark a bout of outperformance by the stock.

Second-line technology stocks had a bad day as the tech-laden US Nasdaq Composite took a pasting. Psion fell 4.5p to 70.5p, Spirent gave up 1.5p to 25.5p, ARM Holdings dropped 3p to 65.25p and LogicaCMG retreated 6.25p to 139.5p.

The support services group Peterhouse added 5p to 286p despite the sale of 285,000 shares at 280p each by David Jackson, the chairman. The disposal followed news that Peterhouse is on the verge of securing pounds 250m of contracts to renew rail lines in Scotland and the North-west of England.

Among small-caps, Hawtin, the Cardiff based mini-conglomerate, added 1.25p to 9p after an extraordinary general meeting gave the green light to the group's disposal of its Powersport International division. On Friday, Hawtin sold its Gul wetsuits business for pounds 340,000 to the unit's management team. Meanwhile, Ramco Energy, ticked 1p lower to 316p, as the oil explorer raised pounds 3.9m through a placing of 1.2 million new shares with institutional investors.

Oystertec rose 1.5p to 13.75p as it emerged that Fidelity International had upped its stake in the company through the purchase of 1.4 million shares. The US fund management giant now controls 15 per cent of the company and has been building a stake in the pipe maker for some time.

Celtic Resources jumped 24p to 189p as the explorer took full control of the Nezhdaninskoye gold mine in Russia, one of the largest gold mines in the world. The owner of the mine, the Russian investment group IG Alrosa, will take a 23 per cent stake in Celtic as payment, leaving it as the group's largest shareholder.

Mano River Resources held steady at 3.6p as the gold and diamond explorer posted narrowed losses for the full year.