European stock markets fell to seven-year lows yesterday. They were led by London, which suffered one of its biggest percentage drops ever, as fears of war in Iraq spooked nervous investors.
However, US markets staged a late rally as investors swooped in to buy shares beaten down by the gloom. The Dow Jones closed up 0.37 per cent at 7,552.07, with other leading US markets gaining slightly more.
Oil and financial stocks bore the brunt of the selling in Europe as investors worried that the US could launch an assault on Baghdad without UN backing or even the participation of its staunchest ally, Britain.
"There's one word for it - carnage. It's horrible," said one London broker. "Nobody has any confidence. Nobody wants to buy anything, and if they do buy anything they're wrong within about 10 minutes. It's fairly gloomy."
The FTSE 100 index of leading shares tumbled nearly 5 per cent to close at its lowest level since June 1995, and more than 50 per cent below its 1999 peak of almost 7,000 points. German shares also lost nearly 5 per cent, hitting a seven-year low, while French shares shed more than 3 per cent of their value.
The falls will knock a further chunk off the value of the shareholdings of Irish personal investors who have already seen more than €2 billion wiped from the value of their investment products last year.
It will also hit pension funds, most of which remain heavily invested in international equities.
However, the news was not so grim for those holding only Irish shares. The Irish stock market lost more than €400 million, or around 1 per cent of its value, but outperformed its European peers. "In the context of what happened elsewhere, they didn't do too badly," one dealer noted.