Many stock markets around the world, including Dublin, tumbled again yesterday as fears grew of a recession in the US.
Some €4.8 billion was wiped off the value of the Irish Stock Exchange. After a torrid fortnight, the Iseq index of Irish shares fell by more than 4 per cent yesterday, with many of the biggest stocks among the heaviest fallers.
The sharp declines in many stock markets were sparked by negative economic data from the US on Tuesday. Concern that increasing rates of late payments and defaults on mortgages could hamper US consumer spending and drag down economic growth prompted a steep global sell-off of equities.
The turmoil in global markets could continue for weeks or even months, analysts said yesterday.
Last night the US markets rallied slightly, however, with the Dow Jones closing up by nearly half a percentage point.
The Irish Stock Exchange took a bigger hit than the rest of Europe. In London, the FTSE closed down 2.6 per cent, while the Eurostoxx 50 index fell 2.78 per cent.
Traders attributed the greater losses in Dublin to technical factors relating to the two largest stocks on the index - AIB and building materials firm CRH. But the Irish stock market has now dropped in value by around €11.5 billion since the Iseq index reached a record high on February 20th.
Yesterday's losses will have done little to allay the fears of equity-linked Special Savings Incentive Account (SSIA) holders whose accounts are due to mature. Pension funds will also take a short-term battering, but should recover in value over a longer period.
If US inflation figures to be published tomorrow are higher than expected, it will prolong the uncertainty, said Goodbody Stockbrokers economist Dermot O'Leary.
"It is the element of the unknown in the mortgage market in the US that is hanging over us like a dark cloud," he added.
NCB equity strategist Bernard McAlinden also hinted at further dark days for investors, saying it was "not obvious" that the market correction was over. But he said the losses did not mean that stock markets were entering into a bear market phase, as falling bond yields and growing earnings would drive equities forward.
"It is not the end of the bull market," said Mr McAlinden. "You would prefer not to have it, but the reality is that you will have volatility in equities."
European markets tend to suffer the brunt of US economic news, but recover better in the long term, he added.
Economists will now be looking at how much economic growth Europe and Asia can generate independently of the US, where growth in retail sales is slowing down.
Bank stocks suffered the most yesterday, with AIB's share price falling by more than 6 per cent, Irish Life & Permanent down 5 per cent and Bank of Ireland down almost 4 per cent. CRH, which is exposed to the US housing market, fell 5.75 per cent.
But it wasn't all bad news for the Irish Stock Exchange yesterday, as packaging group Smurfit Kappa rejoined the Iseq.
Shares in Smurfit Kappa, formerly called Jefferson Smurfit, gained in conditional trading to close at €17.39, 89 cent stronger than its listing price of €16.50.
There was also some good news for homeowners yesterday, with the fall in stock markets raising the prospect that the European Central Bank (ECB) will be less likely to further raise interest rates in response to inflation worries.
ECB president Jean-Claude Trichet said expectations of inflation in the euro zone were now "excellently anchored".
