Further declines in the Irish market yesterday left investors nursing losses of almost €3.3 billion in just two days.
The Iseq index of Irish shares was not the only one to be hit as a global sell-off sent exchanges around Europe tumbling. However, as has been common of late, the Irish market underperformed its peers.
The Iseq closed down 1.1 per cent, at 9,395.83, while Britain's FTSE 100 registered a fifth day of losses, closing down 0.43 per cent, at 6,567.4, its worst run since a six-day fall in mid-November.
While the Irish decline was significant, the index remained above the levels touched earlier this month, when more than €7 billion was lost in one five-day stretch.
Dealers in Dublin attributed the declines to ongoing negative sentiment about the Irish housing market, prompted by a trading update from Irish Life & Permanent, which said it expected €800 million less in new mortgage lending this year compared to 2006. This news came on the back of what was already a negative market prompted by rising bond yields and a higher oil price.
Elsewhere, European shares ended the session at their lowest close in over a week as they were weighed down by banking and resources stocks as jitters on Wall Street dented sentiment.
The pan-European FTSEurofirst 300 index fell 0.3 per cent to 1,598.8, its lowest close since June 13th, as a steeper-than-expected drop in the German Ifo business sentiment index for June also soured the mood.
Europe's benchmark index was down 1.7 per cent for the week, but it is still up 8 per cent so far this year, thanks to mergers and acquisitions and robust earnings.
In Germany, the DAX closed at 7,949.63 points, down 0.19 per cent on the day, while France's CAC-40 closed at 6,023.25 points, down 0.11 per cent.
In the US, the main indices were trading lower amid lingering concerns that troubles in the credit markets might spread.
Investors are also cautious ahead of next week's Federal Reserve policy meeting, where signs of reviving economic growth are expected to keep inflation the predominant issue for policy-makers.
Some investors said the declines were overdone though, with one saying he believed there is still upside. "The market's not overly valued even against bonds, and earnings don't seem to be under any great pressure," said Dave Bradbury, head of equities at Canada Life in London.
In Ireland, the situation is exacerbated by the financial stocks' significant status in the market. Together, the four main banks account for 44 per cent of the exchange's total share capital. - (Additional reporting: Reuters)
