WORLD markets face a nervous opening to the New Year after a sharp fall on Wall Street late on Tuesday evening. Earlier the Dublin market had gained strongly to reach a new all time high, with the ISEQ index adding almost 1.4 per cent in busy end year trading.
Wall Street's fall in the last trading session of the year came too late to affect European markets. The Dow Jones index closed down 101 points at just over 6448 - its biggest fall since July - with a large portion of the losses coming in the last hour of trading. The losses were prompted by renewed fear of higher US interest rates after two sets of economic figures had indicated that the economy was performing strongly.
The US commerce department reported a strong 14.2 per cent rise in house sales in November, while a widely watched index of consumer confidence produced by the Conference Board jumped 4 points in December to 113.8. The news led to heavy losses on US bond market - due to fears of higher interest rates - and this knocked on to a decline in equities.
The selling was largely focused on the main stocks on the market which have outperformed the others in recent months. The S&P 500, a broader index of leading stocks, fell nearly 2 per cent, but the much broader NASDAQ index actually ended slightly higher.
After a strong rise through the year, there have been predictions in recent weeks that the Wall Street market could be in for a heavy fall, particularly after a warning from Mr Alan Greenspan, the chairman of the Federal Reserve Board, that markets were showing "irrational exuberance".
Despite the late decline on New Year's eve, the Dow Jones ended the year up 26 per cent on the end of 1995 and it has gained 68 per cent over the past two years.
The strength of the Dow and of US bond prices has been one of the key factors supporting European markets and investors are likely to watch today's trading on Wall Street particularly closely to see whether Tuesday's fall continues. Earlier on New Year's eve Dublin and London has both reached record closing highs, but in tandem with markets elsewhere in Europe both are likely to open cautiously today.
In Dublin the ISEQ index benefited from an end year scramble for stocks from investors and it rose 36.78 points to close at 2725.63, easily beating the previous record close of 2700. Trading volumers were reasonable with much of the action concentrated on the main stocks.
Bank of Ireland was particularly strong, gaining 8p to 538p, while AIB rose 5p to 396p, while the big industrial stocks, CRH and Smurfit, also benefited from strong demand, with the latter rising 6.5p to 179.5p.
In London the FTSE 100 index moved ahead in the last 15 minutes of trading to reach a new peak of 4118.5, after a small rise of 2.8 on the day.
