Are the international markets finally entering a bearish period? They fell sharply towards the end of the week, following the lead set in Wall Street and, by yesterday's close, the value of Dublin shares as measured by the ISEQ index was more than 5 per cent below Monday's level after a week when investors found much to worry about.
In the US, a weak second quarter earnings report from Boeing re-ignited all the fears about the earnings outlook which first surfaced a few weeks ago, while Dr Alan Greenspan's latest warnings on inflation also upset investors.
Having tried to stage a recovery early yesterday, Wall Street started to go weaker on worries both about earnings and events in Japan, where the outlook for the yen - and for the economy - remains most uncertain.
While it regained some equilibrium in late trading, close attention will now be paid for further earnings reports due next week and to a clutch of US economic figures including consumer confidence, durable goods sales and second quarter GDP estimates.
The related worries about US inflation, earnings and Asia have, of course, been in the market for some time. However, the Boeing results appeared to put a focus on these fears.
On this side of the Atlantic the notable new information this week related to the state of the British economy, where evidence of problems in industry relating to the strong pound are mounting. A profit warning from ICI, accompanying poor interim results, was one of the catalysts from nervousness in Britain, where the FTSE 100 index fell in each of the last four sessions of the week, losing 4.6 per cent. While weakness in the bulk chemicals market also contributed, the ICI warning was largely due to the strength of sterling and the crisis in Asia. These two factors are also affecting many of Britain's other exporting giants, leading to concerns that further profits warnings could be on the way.
Meanwhile, Asia continues to weigh heavily on investors' minds. The risk of renewed yen weakness continues to concern the markets, and will resurface if the prime minister designate, Mr Keizo Obuchi's next moves disappoint.
Analysts were divided on whether the new prime minister and his yet-to-be-appointed Cabinent could take the radical steps they believe are necessary to pull Japan out of its worst economic slump since 1946. So what of Ireland? This week saw a heavy bout of profit-taking, particularly in the financial stocks, where many investors are sitting on very strong gains, while the main industrial stocks also suffered. Smurfit was not cheered by JS Corp results, with investors more concerned about the outlook for product prices in the US and the impact of events in Asia. Brokers remain outwardly confident that the ISEQ still has further gains to make. However, with continued uncertainty in the major markets, a period of nervousness is also likely to lie ahead in Dublin, as the international exposure of quoted companies here means that investors react much more to events on the main markets than to positive news about the domestic economy.
