International and domestic events conspired yesterday to further sap confidence from the markets, sending the Dow Jones to a low not seen since 1997.
Weak economic data from the US and a weak opening of the markets there dragged down stock markets across Europe, all of which also closed sharply lower. Dublin lost almost 4 per cent of its value, with building materials group CRH hardest hit.
The Dow Jones closed at 7591.93, down 1.43 per cent on last Friday's close while the tech-led Nasdaq closed at 1172.09, down 2.27 per cent.
The meeting of the Group of 7 and of the World Bank-IMF in Washington at the weekend conspicuously failed to boost confidence in the global economy, adding to the atmosphere of gloom on world markets.
Analysts predict that the major indices and the US dollar are in for a period of volatility because of persistent worries about economic recovery, the prospect of war with Iraq, and concerns about a Brazil default and Japan's banking system.
Investors kept to the sidelines on Wall Street yesterday on gloomy news about consumer spending, particularly from the Wal-Mart chain, which said its profits would be at the lower end of a predicted range.
Yesterday's sell-off on Wall Street came after five straight weeks of declining stocks. Last weeks' fall was mainly due to earnings warnings from major corporations like Philip Morris and Nortel which drove the Dow and Nasdaq to four-year and six-year lows respectively.
Yesterday the US Commerce Department announced that personal spending and income both rose in August but more weakly than economists had forecast.
Personal spending increased 0.3 per cent in August after rising 1 per cent the previous month. With the start of a new quarter today investors see little prospect of improved earnings.
Up-beat rhetoric from the world's finance ministers meeting in Washington did little to dispel the doubts that they were seriously grappling with the global market turmoil threats to the world economy.
The US Treasury Secretary Mr Paul O'Neill tried to revive optimism in the future by listing positive data about the US economy, including minimal inflation,historic low interest levels and a continuing boom in home and vehicle sales.
"I don't find the world to be a place where hand-wringing should prevail but a place where leaders should get on with it," he said.
On the up side, analysts said that some of the bad market news arose from technical factors having to do with Monday being the end of the third quarter.
In Dublin, the market lost almost 4 per cent of its value, with the biggest hit coming from what one dealer called "the Rolls Royce of the exchange", CRH.
The major industrial shed 15 per cent to close at €11.35, amid news of a possible asbestos liability in the US.
Despite the best efforts of the main banks, most stocks, including financials, followed suit.
AIB closed down 30 cents at €12.10, with Bank of Ireland ending 15 cents lighter at €9.85. "There was nothing good today," said one Dublin trader last night.
Other exchanges fared worse, with the FTSE 100 in London giving up 4.75 per cent and the CAC-40 in Paris plunging by 5.87 per cent. The Frankfurt exchange finished down 5.13 per cent while, across Europe, the DJ Euro Stoxx 50 index was off 6.43 per cent at the end of the day.
The euro meanwhile picked up momentum against the dollar, trading at $0.9879 after $0.9807 in New York on Friday
In London, financial issues, notably insurers, were particularly hard hit.
Aviva gave up 5 per cent to finish at £3.575 sterling while Royal Sun and Alliance fell 9 per cent to £0.9625.
Among banks, Barclays lost six per cent to end the session at £3.715. Lloyds TSB was down 7 per cent at £4.695.
