The Irish stock market suffered its worst ever day of losses in cash terms, with just under €3 billion wiped off the value of Irish shares as the ISEQ Overall Index fell almost 5 per cent. Earlier, the market had fallen almost 6 per cent before a modest recovery in the last hour's trading.
Confirmation of the first case of foot-and-mouth disease in the Republic and fears for its effect on the economy and investor confidence was the dominant factor behind the slump. Another raft of downbeat news from major international companies and the threat of windfall taxes on profits of banks operating in Britain, AIB and Bank of Ireland, contributed to a day of heavy losses on the Irish market.
The Irish market has now fallen more than 15 per cent from its all-time high of February 23rd, putting it uncomfortably close to "bear" territory - where a market has fallen 20 per cent from its high.
The collapse in Dublin was mirrored across Europe where share prices extended their losses after the US markets opened. The Dow Jones was under pressure from the opening bell, quickly notching up another 2 per cent loss. It later lost as much as 3.98 per cent but recovered to end just over 1 per cent down. However, the Nasdaq rose strongly after a seesaw session. The slump in the market is no longer down to a shift in sentiment against the so-called growth telecom, media and technology shares. A series of earnings warnings across the so-called "old economy" has meant that prices of financial and industrial stocks have also fallen heavily.
The prospects for markets are not positive. Friends First chief investment officer Mr Pramit Ghose has adopted a very bearish tone and believes it may be up to a year before the markets turn. Goodbody Stockbrokers head of research Mr Colin Hunt is more positive, stating that markets may turn within four months and that a strong recovery will be evident within the year.
Whoever is correct about the duration of this slump, there is a general belief around the Dublin market that shares will fall a lot further before they begin a slow recovery.
With the FTSE falling to its lowest level for almost two and a half years in London, there was heavy selling pressure on the bigger Irish financial and industrial shares.
Fears that old economy stocks had joined the bear market were generated by disastrous results from Zurich Financial Services, while reports of major job cuts at the US consumer products giant Procter & Gamble left investors wondering where to turn.
The collapse in Zurich shares and speculation that banks operating in Britain may be subject to a windfall tax on profits sent financial shares spiralling downwards across Europe, and Irish financial shares were not immune with AIB, Bank of Ireland, Irish Life & Permanent and Anglo Irish Bank all down heavily.
There was heavy selling of selective leading financial and industrial shares, including Bank of Ireland and Smurfit, although there were no huge trading volumes behind some of yesterday's heavy losses.
Major industrial shares were also sharply lower and CRH - which is in the middle of a rights issue to raise €1.1 billion for acquisitions - fell more than 6 per cent. Other industrial shares such as Independent News & Media and Kingspan, which have suffered earnings downgrades in the wake of poorly received 2000 results, were also well down on the day.
Another sharp fall by Vodafone saw Eircom trade down to an all-time low of €2.25 before the share - still held by more than 450,000 small investors - closed down three cents on €2.35.
The continued weakness in Vodafone shares, which seems unlikely to improve under current market circumstances, poses further question marks over the all-share takeover of Eircom's mobile phone subsidiary Eircell. The value of the Eircell sale to Vodafone to Eircom shareholders has fallen by 25 per cent since the deal was first announced last December.
