The Irish stock exchange was a sea of red by the close of trading on Tuesday, with just five Dublin-listed shares finishing the session in positive territory after a volatile day that was influenced by wild trading on US markets.
The main Iseq index finished the day down just over 1.4 per cent on heavy trading volumes, closing at 6,658 points.
The only green lights on the board in Dublin at the close were AIB (up 3.6 per cent), Ryanair (up 2.3 per cent), CPL Resources (up 1.3 per cent), Glenveagh Properties (up 0.2 per cent)and Abbey (up 0.7 per cent).
The Iseq's heavy hitters, especially those global stocks with major exposure to the US, all struggled. Building materials giant CRH fell 2.2 per cent to €27.60, Kerry Group fell 2.3 per cent to €82.55, while insulation group Kingspan dropped 1.4 per cent to finish the session at €35.40.
Small-cap resources company Aminex was the worst performer on the exchange, finishing down more than 12 per cent a day after providing an update on its Tanzanian operations.
Mirroring the volatility in New York on the Dow Jones and the Nasdaq, the Iseq swung heavily throughout the day. It opened down sharply, losing about 3 per cent almost immediately on the back of Monday’s bloodbath in the US, where the Dow Jones had suffered its biggest ever one-day points fall.
During late afternoon trading in Dublin, the situation started to reverse in tandem with early morning trading in New York, when the Dow shot into positive territory shortly after it opened. Approaching 3.45pm in Dublin (10.45am in New York), the Iseq had clawed back ground and was down just 0.5 per cent.
As the US rally struggled to gain traction, however, the Iseq headed south once again in volatile late afternoon trading.
Trajectory
Paul Sommerville, a 2011 Dáil candidate and the chief executive of Dublin-based Sommerville Advisory Markets, said the trajectory of Irish trading was directly attributable to the situation in the US.
He rejected the notion, advanced by some analysts in the US, that the situation there was just an inevitable stock market correction or “blip”.
“I don’t believe this is a blip. I think we will see volatility for the next 18 months and retail investors need to be very careful.”
However, Ian Quigley, the head of investment strategy at Investec Wealth and Investment Ireland, argued the current volatility was "temporary".
“ The context is that we have gone through a prolonged period of low volatility in the US. If volatility is low for a long period, it is always likely to increase at some stage.”
Mr Quigley said the concerns in US markets that caused this week’s global equities sell-off were rooted in concerns over wage rises and whether interest rates there might rise to combat inflation. Increasing bond yields were also providing competition for equities as an asset class.
“When a broad sell-off happens, everyone gets caught up in it. It has a cascading effect and it is indiscriminate,” he said, explaining the impact on Irish shares.
He said that despite the short-term volatility he was confident in shares over the longer term and saw a buying opportunity. “We are looking for any signs of indiscriminate selling we can take advantage of.”
Fluctuations
While trading remained volatile on Wall Street heading into afternoon trading there, some analysts played down suggestions that the fluctuations could be an early warning of a new recession.
"The correction we are seeing is not economically significant at this point," said Eric Winograd, senior economist at Alliance Bernstein in New York.
“ The [US]stock market is basically flat year-to-date and up significantly over any longer time horizon. The underlying economy is strong, and over time that should provide support to the market.” – Additional reporting: Reuters
