Stock markets tumbled again yesterday, hit by a rise in bond yields and deepening concerns over the outlook for interest rates in both Europe and the United States.
Major US indices posted their biggest three-day drop since February's global equity rout, and their biggest one-day loss in three months.
The sell-off began on Tuesday, just days after the S&P 500 had completed its best two-month performance in nearly four years, fuelled in part by mergers and acquisitions.
The Irish market succumbed to the general mood after a bright start. By the close, the Iseq had given up a further 45 points to bring the total fall in the value of the index to 5.3 per cent in the last three days.
Among Europe's benchmark indexes, London's FTSE 100 dropped 0.27 per cent, while France's CAC 40 lost 1.46 per cent, and Frankfurt's DAX slipped 1.44 per cent.
"It's the reality of higher interest rates and the spectre of what that means, potentially, for M&A activity and also corporate profits," said Tim Woolston, portfolio manager at Boston Advisors LLC.
"M&A activity has been driving the rally for the past weeks and if the cost of borrowing goes up, it may not make as many deals economic."
The Dow Jones industrial average slid 198.94 points, or 1.48 per cent, to end at 13,266.73, with all 30 Dow components finishing in the red.
The Standard & Poors' 500 Index lost 26.66 points, or 1.76 per cent, to finish at 1,490.72. The Nasdaq Composite Index dropped 45.80 points, or 1.77 per cent, to close at 2,541.38.
The three benchmark US indexes suffered their biggest one-day percentage losses since March 13th.
European shares extended their slide to a fourth consecutive day yesterday. Shares in the utilities and banking sectors, particularly sensitive to rate increases, were among the hardest hit.
The pan-European FTSEurofirst 300 index closed 1.1 per cent lower at 1,569.05 points.
The benchmark index has lost 3.5 per cent over the past four sessions.
"The trigger is clearly the rise in bond yields and the prospect of further rate hikes in Europe and fading hopes of rate cuts in the US," said Bert Jansen, equity strategist at Exane BNP Paribas in Paris.
The US benchmark 10-year Treasury note dropped in price as central banks, including the European Central Bank, have raised rates to keep inflation at bay.
The 10-year yield rose to 5.10 per cent.
Higher yields make bonds more appealing to investors and reduce their appetite for more risky investments such as equities.
