Key US inflation figures due today are being nervously awaited by investors, after European financial markets lost ground yesterday following Friday's late fall on Wall Street.
By late yesterday, the US market had regained some stability, lending some support to European markets which recovered ground in late trading. By the close of business yesterday evening, the Dow Jones index had added 96.57 points, or 0.96 per cent, to close at just over 10,116. However, further volatile trading is expected in the days ahead and the mood will not be helped by today's anniversary; on Black Monday, October 19th, 1987 US share prices collapsed by 22 per cent, leading all world markets downwards.
Today the focus will be on US September consumer price inflation figures. If they point to a rise in price pressure and raise expectations in the market of another rise in US interest rates then share prices could fall further, after Friday's wholesale price figures showed producer price inflation accelerating at the fastest rate for nine years.
While strong reports from a number of financial groups boosted the main shares on Wall Street late yesterday, many of the other stocks remained weak. Reflecting this, the Nasdaq index, which includes many of the technology shares, ended down by almost 1.6 per cent yesterday.
After Wall Street's 2.6 per cent fall on Friday, Asian markets fell overnight and European stocks got off to a shaky start. However, they mainly found their footing later.
The Irish market fell heavily in early trading, in line with the response on major European markets to Friday's heavy sell-off on Wall Street. By midday in Dublin, the ISEQ Index had fallen to below 4600 - its lowest level for a year - before the market recovered some ground after Wall Street opened in a more positive fashion.
The afternoon recovery was most pronounced in the major financial share, with AIB recovering from an opening low of €11.60 to close on €11.80, a fall of 27 cents on the day, while Bank of Ireland opened at €7.50 before closing on €7.80 - a fall of just 3 cents on the overnight level.
Industrial shares accounted for the bulk of the 2 per cent fall in the market, with CRH shares taking a hammering for the second day, falling 77 cents to €17.65. Two other leading industrials, Eircom and Smurfit, also suffered, with the result that the ISEQ Industrial Index fell over 2.5 per cent.
The fact that the Irish market has already sharply under-performed international markets this year has not limited the losses in the past few days. Dealers see little sign of any significant improvement in the coming days and weeks - and certainly do not foresee any recovery until the interest rate situations in the US, Europe and the UK becomes clearer.
Other European markets were also weak. In London, the FTSE 100 index of leading shares fell to 5,798.3 points, its lowest level since early February, before recovering to close off 38.1 points, or 0.64 per cent, at 5,869.2 points.
In Frankfurt, the X-DAX index of 30 leading shares fell 0.54 per cent, while the CAC-40 index in Paris ended the day down 0.64 per cent.
The latest bout of market nerves has been set off by increasing signs of US inflation and also by a warning by US Federal Reserve chairman Mr Alan Greenspan on Thursday that share prices may be overvalued.
Mr Greenspan's message was followed by the publication on Friday of a surprisingly high jump of 1.1 per cent in producer prices in September.
Investors are now primed for today's publication of the US Consumer Price Index for September.
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