SHARE prices in Dublin and London are expected to open lower today with financial stocks likely to bear the brunt of the losses. All eyes will be on Wall Street when it opens at lunchtime following the sharp fall in US shares on Friday.
Last night analysts said the Irish market was likely to open weakly but were cautiously optimistic that no crash in the value of shares was likely.
Ruling out a spectacular fall in the Dublin market, Dr John Hogan, chief equity analyst at Riada Stockbrokers, said he would not he surprised to see the market coming back. Pointing to the very strong gains in market values in recent months, he believed that there will be some modest fall in share values.
"There will he a correction, but I don't see a crash as extreme as the 1987 situation. We have probably seen the best of the bond yields but equities will come back," he said.
Financial stocks are likely to be dragged lower in line with a weaker bond market, but Dr Hogan said industrial stocks will be spared much of the gloom.
Following the 171 point drop in the Dow Jones index of US shares on Friday, international market will be tested as they open for business after the weekend.
The Far East will be the first indicator with the Japanese bond market expected to be badly hit by the fall on Wall Street.
In London, analysts have suggested that the FTSE index of leading shares could initially fall by more than 100 points, before the US market opens.
The bulk of the fall in the US came too late to be fully reflected in European markets, but early declines did affect the Dublin market. On Friday the ISEQ Overall index closed down 21 points at 2,376, with Bank of Ireland, AIB and CRH among the worst affected stocks.
Bonds also suffered, with the 10 year price down by more than a point to 99.90 to yield 7.85 per cent.
The London market fell 47.9 points to 3,710.3 on Friday, despite the positive news of a quarter point cut in British interest rates.
While few analysts on Wall Street expect the crisis to repeat itself on anything like the same scale as in 1987, many have signalled that Friday's performance may have indicated the beginning of a serious correction in the market.
More pessimistic analysts say the market may move down by a full 10 per cent over the next few days before buyers are able to regain the upper hand.
However, not everyone is convinced that the losses will continue. Some US analysts said it was purely a "knee jerk" reaction and that the market will go up again today.
Analysts will be again watching US government statistics due this week to see if the unexpectedly strong employment figures which triggered Friday's fall really indicate a strengthening economy and the end of further interest rate cuts.
Mr John Lipsky, senior economist at Saloman Brothers, said strong economic data could force 30 year US bond yields, currently trading at 6.7 per cent, above 7 per cent. "Investors have concluded that the slowdown is over. The question is whether the economic rebound is going to be strong enough to stimulate an upturn in inflation," he said.
