International stock markets look set to face a further test next week, after the US market ended the week with an extremely volatile session, mainly due to concerns about Latin America. Trading was suspended on the Sao Paolo stock market in Brazil, after shares there fell by 10 per cent, as investors withdrew money following a downgrade of the country's debt by credit agency Moody's.
Earlier, a brave attempt by European stock markets to end a nerve-wracking week with a rally ran out of steam yesterday as continued concern about Asia, Russia and Latin America overshadowed jobs data confirming the US economy remained healthy in August. European stock markets started strongly, but lost most of their gains late in the day as Wall Street erased an early 80-point gain. Having been down over 150 points at one stage, last night Wall Street closed down 41.97 at 7640.25, unsettled by the news from Brazil which broke after European markets closed.
Irish shares proved the exception to the general upward trend in Europe as the ISEQ index lost a further 2.3 per cent to close below the 4,000 level at 3,944.47.
Dealers attributed Ireland's underperformance to a tendency by international investors to move out of peripheral markets during the current uncertainty. US buyers in particular were said to be keen to bank some of the profits they have made in the Irish market in recent years, particularly in light of losses suffered elsewhere. "They are not really looking at the shares or at the outlook for earnings. They just want to lock in profits," one dealer said.
CRH, which announced a healthy set of interim results earlier this week, was one of the few stocks to remain firm yesterday, adding 6p to 840p, but most of the other leading stocks added to this week's already hefty losses.
Dealers said the recovery in European stocks, after heavy losses on Thursday, was mainly technical as traders closed out positions before the US bank holiday weekend.
"It's a typical bear market. You'll see the FTSE go ahead 2030 points one day and then take a big hit the next," said one dealer in London.
Frankfurt's dollar-sensitive Xetra DAX index was at one point up as much as 140 points, before retreating to a 68-point rise, after a 3 per cent rout on Thursday.
French shares closed more than 1 per cent higher but off their highs and, in London, the FTSE 100 closed 48 points higher.
European shares had been encouraged by US employment figures which met market expectations, showing a still healthy economy with non-farm payrolls rising 365,000.
Analysts said the figures, which also showed a greater than expected 0.5 per cent rise in average hourly wages, ruled out any hopes of a cut in US interest rates.
But the figures failed to settle a fragile Wall Street which put in another volatile performance, seesawing from positive to negative territory.
Markets should receive a brief respite on Monday, when the US market will remain closed for Labour Day, but they remain cautious ahead of the Russian Duma's postponed vote on Monday on whether to confirm acting Prime Minister, Mr Viktor Chernomyrdin in his post. Russia's lower house of parliament voted at the last minute on Friday to put off a vote on confirming the next prime minister for three days after President Boris Yeltsin intervened to offer crisis talks.
Markets were also awaiting the outcome of a meeting in San Francisco between Japanese Finance Minister, Mr Kiichi Miyazawa and US Treasury Secretary, Mr Robert Rubin. They are expected to be joined by Federal Reserve Chairman, Mr Alan Greenspan.
Financial markets have been speculating that Japan and the US might discuss a concerted credit easing at this weekend's meeting.
