Global stock markets took a hammering yesterday amid fears that the recovery in the US economy was losing steam.
Some €602 million was wiped off the value of Irish shares during bank holiday trading while poor sentiment swept through the biggest US and European markets, driving shares down.
The key US markets lost more than 3 per cent in a sell-off mirrored on the German, French, British and Swiss markets, which lost up to 5.66 per cent.
With most stockbrokers in Dublin not working due to the holiday, the losses on the Irish exchange were smaller, although the market is expected to open weaker this morning.
Traders attributed the gloom to fresh evidence pointing to a "double dip" recession in the US, when a report showed activity in the service sector grew last month at the slowest rate for half a year. This followed indications last week of falling manufacturing activity.
Taken together, both sets of figures led certain observers to forecast a US interest rate cut soon. Although analysts said the US economy was unlikely to slip into recession itself, some said the slide in stock markets now presented a threat in its own right.
"It's all doom and gloom," said one Dublin trader as the market closed.
"With the ISEQ index of Irish shares down 1.06 per cent, he said investors in Irish stocks were following their US counterparts. No specific item of news was behind the decline, he said.
Leading Irish shares such as CRH, AIB and Bank of Ireland lost ground amid the sell-off, with Ryanair the exception ahead of new financial results this morning.
The budget airline yesterday said it carried 1.46 million passengers in July, some 41 per cent more than the same month last year.
The positive data came as British Airways said it carried 10 per cent fewer passengers in July than in the same month last year.
With negative economic data setting the tone in the US yesterday, it also emerged that federal prosecutors in the US were investigating allegations that senior executives in the collapsed energy trader Enron had bribed government officials outside the US to win contracts.
In the past, Enron has denied allegations of improper behaviour.
News of the latest investigation into the company emerged as yet another US energy firm, Migrant, disclosed that it too was being investigated by the federal authorities.
Another embattled energy trader, Dynegy, was served with a lawsuit by a former senior vice-president, who alleged he was sacked after refusing to manipulate the company's books.
With the Enron scandal seen as the first in a wave of upheavals to hit US business last autumn, there was little to cheer investors.
The Dow Jones industrial average index finished 3.24 per cent weaker, losing 269.5 points, while the broader-based Standard & Poor's 500 fell 3.43 per cent. Shares on the technology-heavy Nasdaq index, once the investors' darling, lost 3.97 per cent.
A leading US analyst, Mr Joel Naroff of Naroff Economic Advisers, said: "The chances of a double dip are real if the stock market continues to go down 200 to 300 a day for a few more weeks. We have still got about another 1,000 on the Dow and a couple of points on the Nasdaq as a cushion. But we are losing cushion."
The scene was no different in Europe, where concerns about the electronics group Siemens, the HSBC and Crédit Suisse banks, and the supermarket group Carrefour all drove shares downward.
The German market lost 5.66 per cent while the French market dropped 3.11 per cent and the Swiss market fell 4 per cent. The FTSE 100 index in Britain closed 1.94 per cent weaker.
