Stock markets may be facing renewed selling pressure today after a tentative recovery on Wall Street fizzled out last night. Early gains, which saw the Dow Jones index rise more than 1.5 per cent in morning trading, were wiped out later and the index finally closed down just over 0.5 per cent.
Wall Street's inability to capitalise on Tuesday's record recovery and its failure to hold the early 130-point gains on the Dow may unnerve investors, although sources said last night that they do not expect heavy losses when markets in Europe open this morning.
Analysts had earlier warned that Tuesday's record recovery on Wall Street did not necessarily indicate an end to the instability and that share prices could easily fall once again. That was underscored in the last half-hour of trading in New York last night, when the index moved from a modest gain to a loss of 45 points. "This sort of volatility is going to go on for a good while yet," said one New York analyst.
Some sources said it was no surprise that Wall Street lost some of Tuesday's gains, with many of those investors who bought shares at the bottom of the market earlier this week looking to take a quick profit.
Boosted by Tuesday's gains in the US, share prices in the Far East rose sharply yesterday in a pattern that was mirrored when the major European markets opened for business.
Share prices in Dublin, London, Paris and Frankfurt increased by 3 to 4 per cent, but fears that the Wall Street recovery might be temporary led the Irish and British markets to lose much of those early gains. There may be further selling today.
The Irish stock market gained almost 3 per cent in early trading, with shares like Bank of Ireland and Allied Irish Banks - which have suffered most in the recent selling - up sharply before losing some of those early gains.
Dealers in Dublin said trading was dominated by private investors looking for bargains. The big institutional investors, who had remained out of the market when prices were falling, are still staying clear. The ISEQ closed up 1.2 per cent on the day.
London's FTSE index pushed ahead sharply at the opening but weakened in later trading and finished up just 1.3 per cent.
The major European markets put in more robust performances and the Frankfurt market - by far the most exposed to the Russian financial crisis - rose more than 3.7 per cent while the Paris market closed 2.3 per cent higher.
In Russia, as the Clinton/ Yeltsin summit failed to come up with new ideas to save Moscow's economy, Russian officials pulled in different directions to get to grips with the financial crisis.
The State Duma lower house of parliament adopted an economic policy blueprint approved by the acting premier, Mr Viktor Chernomyrdin, enshrining money-printing, reflation and state control, while acting deputy premier Mr Boris Fyodorov signalled a contrary tack.