Index loses €3.72bn after US interest rates warning

Market Report: Ireland's benchmark index lost €3

Market Report: Ireland's benchmark index lost €3.72 billion of its value yesterday, tracking European and US markets downward, after the chairman of the Federal Reserve indicated US interest rates may keep rising.

The Iseq slid 375.87 points, or 4.9 per cent, to close at a near six-month low of 7,303.15. Stocks slumped across the globe after comments from Fed Chairman Ben Bernanke were interpreted to suggest rates may rise even as the world's biggest economy slows.

Meanwhile, European investors were concerned that the European Central Bank may raise interest rates by 0.5 percentage points when it meets tomorrow, instead of the 0.25 percentage points expected by many economists, after Bernanke's comments. The prospect of higher borrowing costs in Europe and the US has rattled investors for five weeks.

"It's been a weak, bleak day," one Dublin trader said. "Every time Bernanke speaks it has an impact. Large investors are selling illiquid stocks on the periphery of the world, like Ireland."

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Only one of the stocks listed on the Iseq rose yesterday. The biggest decline was posted by Elan, which tumbled €2.70, or 18.3 per cent, to €12.06 following news the pharmaceutical company had secured only restricted approval by the US Food and Drug Administration for the reintroduction of its multiple sclerosis drug, Tysabri.

The drug had been withdrawn following the deaths of two patients involved in trials of the drug from a rare brain disease. The decision allows the drug to be sold on a restricted basis.

"A lot of hedge funds play Elan, and they were well marshalled to knock the stock when Elan came out with the news," a dealer said.

Financial stocks also plunged in Dublin, led by Anglo Irish Bank, which fell 72 cent, or 5.9 per cent, to €11.48. Shares of Allied Irish Banks dropped 95 cent, or 5 per cent, to €17.90, while Bank of Ireland declined 52 cent, or 3.7 per cent, to €13.63.