Brexit fears continue to stalk markets as Iseq falls below key marker

The Iseq share index fell below the key psychological 6,000-point level in late trading yesterday for the first time since February as investors continued to fret about Brexit.

Meanwhile, the market interest rate on Ireland’s benchmark 10-year Government bonds rose about 0.07 percentage points to 0.83 per cent, while the yield on similar German securities fell below zero for the first time as investors sought out its perceived safe haven status at a time of massive market nervousness.

The difference between German and Irish 10-year bond yields diverged to hit its widest point since mid-February, when global markets were last gripped by panic.

Sterling slid against most other major currencies and oil prices fell as five polls from four companies put the Leave campaign ahead and the Sun, Britain's biggest-selling newspaper, backed a Brexit on its front page ahead of the June 23rd referendum.

Rate hikes

A Brexit would increase the risk to global growth, further weigh on the euro while strengthening the dollar. This would tighten financial conditions and may prompt the Fed to reconsider rate hikes, said

Jeffrey Kleintop

, chief global investment strategist at

Charles Schwab

in Boston.

European shares fell for a fifth straight session, with the pan-European FTSEurofirst 300 index falling 1.8 per cent. The Iseq closed down 1.8 per cent to 5,977.2, marking the Irish market’s sixth straight day of decline.

Financials were among the worst performers, with Bank of Ireland and Permanent TSB both falling more than 5 per cent.

Two-month low

Volatility in the pound spiked to its highest in at least 20 years, rising beyond heights seen when

Lehman Brothers

collapsed in late 2008. Sterling weakened 0.4 per cent to 79.43 pence per euro, approaching an almost two-month low reached on Monday. A weaker sterling would put Irish exporters at a disadvantage.

Separately, oil prices fell for a fourth straight day as the upcoming UK referendum overshadowed signs of a return to health for crude markets after the International Energy Agency said the oil market was essentially balanced after two years of surpluses. Brent crude oil futures fell 74 cents to $49.61 a barrel.

"Even as both Opec and the International Energy Agency talk about a tighter oil market, fear of the fallout from a UK exit from the euro zone is throwing global markets into a tizzy," said Phil Flynn, an analyst at Price Futures Group. – (Additional reporting: Reuters and Bloomberg)