More than €1.3 billion was knocked off the value of Irish shares yesterday, as mounting concerns over a war in Iraq prompted a mass exodus from equity markets around the world.
Dublin's 2.57 per cent loss was repeated across the leading global exchanges, with the FTSE 100 faring particularly badly as it sank to its lowest level since 1995. The index closed 3.4 per cent lower,breaking through key technical support levels as it fell.
The general downward sweep began in Europe in early morning and, despite initial rumblings of optimism when the US markets opened, continued as soon as UN weapons inspector Mr Hans Blix delivered his first full report to the Security Council on Iraq's co-operation with arms inspectors in mid-afternoon.
In the US, the blue-chip US Dow Jones Industrial Average dipped below the psychological 8,000 level for the first time since last October. It closed at 7,989.56, down 1.74 per cent. The Nasdaq saw similar declines, trading off by more than 1 per cent as the evening progressed.
In Dublin, all the front-line stocks were beaten back, with the main financials ending on average 3 per cent lower as previous resistance levels were breached.
Budget airline Ryanair also suffered in the pre-war jitters, shedding more than 5 per cent in anxious trading.
Dealers said prospects for today were not good, predicting that European markets would once again track the US market lower.
"I would have thought it probably won't bounce," said one dealer last night.
"The war drums are beating and as long as they keep beating, the markets are going to take fright," said Mr Jim Power, director of investment strategy at Friends First. "Even if war begins, we'll have no more than a relief rally."
The dollar also suffered in the prevailing disquiet, dragged to a four-year low against the euro in morning trade.
The technical $1.09 level was briefly broken in the wake of a heavy speculative push, but the euro failed to build on the gains, falling back to $1.083 by the time closing bells rang across the continent.
Mr Niall Dunne, financial markets economist with Ulster Bank, said trade had been influenced by rumours of possible market intervention from US, Swiss and Japanese monetary authorities, but signalled President George W. Bush's State of the Union address to Congress tonight as the key event to move currency markets over coming days.
Mr Dunne said traders would also be keeping a critical eye on the dollar stance adopted by new US treasury secretary Mr John Snow, who is due to be confirmed today.
On the London market, insurers came under most pressure as concerns rose about their ability to withstand continued declines in the equity markets. Royal & Sun Alliance, Aviva and Prudential all lost 7-8 per cent on solvency worries, as the FTSE 100 marked its 11th consecutive day of losses by ending at 3,480.8.
Elsewhere the banks took big hits as investors worried about the impact of economic disruption should war break out with Iraq, with Lloyds TSB down 5.5 per cent and Barclays down 3.6 per cent.
"It's hard to see there being a significant rally in equity markets until one of the major global uncertainties goes," said Bank of Ireland chief economist Dr Dan McLaughlin last night.
Dr McLaughlin expects both currency and equity markets to remain in the grip of volatility as long as the threat, rather than the act, of war persists.-
