More than €1.3 billion was wiped off the value of the Irish stock market yesterday as European equity markets were hit by worries about rising interest rates.
The Iseq index of Irish shares lost 1.1 per cent of its value, falling to its lowest closing level in three months, while London's FTSE 100 recorded its worst two-day fall in three-and-a-half years.
Other European markets were not immune to the downturn with German shares losing 1 per cent of their value while French stocks shed 1.7 per cent.
The pan-European FTSEurofirst index of 300 leading shares fell 1.3 per cent to end near a two-month low, down from a near five-year high last week.
"The fear of higher interest rates to combat inflation has been the excuse for a lot of profit-taking," said Stuart Draper of stockbroker Dolmen Butler Briscoe.
He noted that valuations of certain stocks, particularly in the resource sector, had been "frothy" of late, prompting investors to exit.
Among the mining stocks that were hit yesterday were Kazakhmys and Xstrata, both of which tumbled by 8.4 per cent, BHP Billiton which was 5.7 per cent lower and Anglo American, which fell by 5.9 per cent.
"A sense of reality is coming back into the commodity markets," said Roger Cursley, a strategist at Investec Securities in London.
"You've got to look at these prices in perspective.
"You've still got things like Anglo American, Rio Tinto higher than they were at the end of March.
"They have had phenomenal runs. Over the last 12 months, they're up the likes of 100 per cent.
"It's really difficult to see the economic justification for that."
In Dublin, fruit group Fyffes, Independent News & Media and building materials firm CRH were among the heaviest losers, while Tullow Oil also suffered as it shed 8 per cent.
Fyffes ended the day 5 per cent lower, Independent lost 4.8 per cent of its value while CRH gave up 3.6 per cent. However, Mr Draper believes the current correction should prove relatively short-lived and could throw up buying opportunities for canny investors.
"Markets could drift for a week or two but I think we are looking at weeks, not months, in terms of the length of the correction," he said, pointing to the sharp but short-lived downturn in equity markets last October.
US blue-chip stocks ended higher last night as a retreat in oil and metals prices helped to temper some recent inflation worries.
The Nasdaq ended down, while the Standard & Poors 500 index was little changed.
Based on the latest available data, the Dow Jones industrial average was up 47.78 points, or 0.42 per cent, to end unofficially at 11,428.77
