WORLD MARKETS:IRISH STOCKS lost more than 6 per cent of their value amid a renewed sell-off on international markets as Federal Reserve chairman Ben Bernanke warned of "significant threats" to the fragile US economy.
With new data pointing to new pressure on the retail and manufacturing sectors in the US, the price of oil fell below $75 a barrel for the first time in more than a year on fears that a series of government investments in banks in the US and European will not avert a global recession.
The decline came as the Opec cartel of oil-producing nations cut its 2009 demand forecast for a second month in response to "dramatically worsening" conditions in financial markets.
Pressure on the price of oil hit energy giants Exxon Mobil and Chevron, which lost more than 8 per cent, and Wal-Mart lost 5.8 per cent after a new report showed that US retailers had seen their biggest monthly sales decline for more than three years in September.
Concern about the gathering threat of inflation was supported by data on the New York manufacturing sector, which suggested activity fell this month to the lowest level since 2001.
Morgan Stanley lost 15 per cent after an analysis by Oppenheimer said the US government's bank rescue was not a "panacea" to its issues. JPMorgan Chase was down 2.14 per cent as it told the market of plans to set aside more money to cover loan losses in light of the deteriorating economic situation in the US.
With the Standard Poors 500 index of US shares down 6.5 per cent in lunch-hour trading in New York, each of the major indices in Britain, France and Germany lost more than 7 per cent.
In Dublin, Bank of Ireland shares dropped more than 14 per cent, CRH lost more than 10 per cent of its value, and Irish Life Permanent shed 3.9 per cent.
The gainers included Anglo Irish Bank, whose stock rose more than 6 per cent. After trading as low as €2.81, AIB closed one cent higher at €3.21.
Mr Bernanke, in a speech to the Economic Club of New York, said it would take time to restore normal flows of credit in money markets. "By restricting flows of credit to households, businesses, and state and local governments, the turmoil in financial markets and the funding pressures on financial firms pose a significant threat to economic growth."
Separately, the Fed said in a "beige book" regional review of the US economy that growth deteriorated throughout the country last month. "Reports indicated that economic activity weakened in September across all 12 Federal Reserve districts. Several districts also noted that their contacts had become more pessimistic about the economic outlook.
"Consumer spending decreased in most districts, with declines reported in retailing, auto sales and tourism. Nearly all districts commenting on non-financial service industries noted reduced activity."
